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O'Neil Enterprises produces a line of canned soups for sale at supermarkets across the country. Demand has been soft recently and the company is operating
O'Neil Enterprises produces a line of canned soups for sale at supermarkets across the country. Demand has been "soft recently and the company is operating at 75 percent of capacity. The company is considering dropping one of the soups, beef barley, in hopes of improving profitability. If beef barley is dropped, the revenue associated with it will be lost and the related variable costs saved. The CFO estimates that the fixed costs will also be reduced by 25 percent. The following product line statements are available: Broth Beef Barley Minestrone Product Sales Variable costs $37,800$47,900 42,000 5,900 9,400 23,700 14,100 8,100 6,000 S(3,500) $56,300 43,500 12,800 10,500 $ 2,300 Contribution margin Fixed costs allocated to each product line Operating profit (loss) Required a-1. Complete the following differential cost schedule Alternative: Drop Beef Barley Status Quo lower under the alternative Revenue Less: Variable costs Contribution margin Less: Fixed costs Operating profit (loss)
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