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need answer as soon as possible Problem 9-2 Deciding Whether to Add or Drop a Product (LO1. CC3) Tracey Douglas is the owner and managing
need answer as soon as possible
Problem 9-2 Deciding Whether to Add or Drop a Product (LO1. CC3) Tracey Douglas is the owner and managing director of Heritage Garden Furniture Ltd. a South African company that makes museum quality reproductions of antice outdoor furniture Tracey would like advice concerning the adviety of elminating the model lawn chair. These lawn chairs have been among the company's best sing products, but they seem unprofitable A condensed statement of operating income for the company and for the model Clown chale for the quarter ended June 30 follows Models ANT Launcher Products Sales Cost a sales 1.600,000,000 Direct materials 1,613,000 Direct Labour 330,00 1.400.000 Fringe benefits of director 67, 285,200 Variable stringered 16,500 3.000 Building rent and maintenance 13,200 62.000 Depreciation 89,60 155.000 Total cost of sales 3,602,200 Gran Brei 112.00 225 Selling and finistratie Product salaries 46,200 155,000 les commissions (of let) 70.000 110.000 Trine benefits (20 of salaries and mission) 23.240 Shipping 21,000 248.000 General adinistrative 224,000 902.00 Total selling and administrative penses 154.400.000 et operating Income Cess) R (72,740) 7.000 93.000 The currency in South Africa is the land, denoted here by R + Mai The currency in South Africa is the rand denoted here by R. The following additional data have been supplied by the company a. Direct labour is a variable cost at Heritage Garden Fumiture. b. All of the company's products are manufactured in the same facility and use the same equipment Building rent, maintenance, and depreciation are allocated to products using various bases. The equipment does not wear out through use: It eventually becomes obsolete c. There is ample capacity to fall orders. d. Dropping the model C lawn chalr would have no effect on sales of other product lines. e Inventories of work in process or finished goods are insignificant Shipping costs are traced directly to products, g. General administrative expenses are allocated to products on the basis of sales dollars. There would be no effect on the total general administrative expenses if the model Clown chair were dropped h, if the model Clown chair were dropped, the product manager would be lid off, Required: 6-1. At current level of sales.compute the effect of net operating income of the Model C3 lawn chair is dropped, R mnet operating income 1-b. Would you recommend that the model Clown chair be dropped OW ONO 2. What would sales of the model Cawn chat have to be at minimum. in order to justify retaining the product?int Set this pas break even problem but include only the relevant costs from art (0) Round Contribution margin roto" to 2 decimal places and final answer to the nearest whole number) Step by Step Solution
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