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 70 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. Product Sales Variable costs Contribution margin Fixed costs allocated to each product line Operating profit (loss) Broth $32,600 22,000 S10,600 4,700 S 5,900 Beef Barley S 42,800 38,600 S 4,200 6,000 S (1,800) Minestrone $ 51,200 40,100 $ 11,100 7,100 $ 4,000 Required: a-1. Complete the following differential cost schedule. a-2. From an operating profit perspective, should O'Neil drop the beef barley line? b. When the product manager for the minestrone soup hears that managers are considering dropping the beef barley line, she points out that many O'Neil customers buy more than one soup flavor and if beef barley is not available from O'Neil, some of them might stop buying the other soups as well. She estimates that 5 percent of the current sales of both broth and minestrone will be lost if beef barley is dropped. b-1. Complete the following differential cost schedule, b-2. Based on the estimate from the project manager, should O'Neil drop the beef barley line? Complete this question by entering your answers in the tabs below. Reg A1 Reg A2 Req B1 Reg B2 Complete the following differential cost schedule. Status Quo Alternative: Drop Beef Barley Difference S $ Revenue Le55: Variable costs Contribution margin Less: Fixed costs Operating profit (lass) 126,600 100,700 25,900 17,800 8,100 83,800 62,100 21,700 42,800 38,600 4,200 S $ 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 70 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. Product Sales Variable costs Contribution margin Fixed costs allocated to each product line Operating profit (loss) Broth S32,600 22,000 S10,600 Beef Barley $ 42,800 38,600 $ 4,200 6,000 S (1,800) Minestrone $ 51.200 40.100 $ 11,100 7,100 $ 4,000 S 5,900 Required: a-1. Complete the following differential cost schedule. a-2. From an operating profit perspective, should O'Neil drop the beef barley line? b. When the product manager for the minestrone soup hears that managers are considering dropping the beef barley line, she points out that many O'Neil customers buy more than one soup flavor and if beef barley is not available from O'Neil, some of them might stop buying the other soups as well. She estimates that 5 percent of the current sales of both broth and minestrone will be lost if beef barley is dropped. b-1. Complete the following differential cost schedule. b-2. Based on the estimate from the project manager, should O'Neil drop the beef barley line? Complete this question by entering your answers in the tabs below. Req A1 Req A2 Req B1 Req B2 When the product manager for the minestrone soup hears that managers are considering dropping the beef barley line, she points out that many O'Neil customers buy more than one soup flavor and if beef barley is not available from O'Neil, some of them might stop buying the other soups as well. She estimates that 5 percent of the current sales of both broth and minestrone will be lost if beef barley is dropped. B1. Complete the following differential cost schedule. Show less Status Quo Alternative: Drop Beef Barley Difference (all lower under the alternative) Revenue IS [ s Less: Variable costs Contribution margin Less: Fixed costs Operating profit (loss) 126,600 100,700 25,900 17,800 8,100 S Windows Ink Workspace
