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 Broth Beef Barley Minestrone Sales $3,600 $43,700 552,100 Variable costs 2220 40,200 Contribution margin $11,300 $ 4,500 $11,40 Fixed costs allocated to each product line 6,600 Operating profit (105) $ 6.000 $ 2,100 $ 3,700 Required: 8-1. Complete the following differential cost schedule. -2. From an operating profit perspective, should O'Neildrop 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 10 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 6-2. 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 Reg 1 Reg 2 Complete the following differential cost schedule. Status Quo Alternative: Drop Beef Barley Difference Revenue Less: Variable costs Contribution margin Less Fored costs Operating profit (los) Reg A1 Reg Reg 1 Reg 02 From an operating profit perspective, should O'Neill drop the beef barley line? Yes No Reg1 Reg A2 Req B: 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'Tell customers buy more than one soup flavor and if beef barley is not available from O'Neill, some of them might stop buying the other soups as well. She estimates that 10 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 call lower under the alternative) Revenue Less: Variable costs Contribution margin Less: Fixed costs Reg A1 Reg A2 Rea Bi Reg 2 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 10 percent of the current sales of both broth and minestrone will be lost if beef barley is dropped. B2. Based on the estimate from the project manager, should O'Neil drop the beef barley line? Show less Yes No
