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Outdoor Luggage Corporation produces hard-sided luggage for sports equipment. Financial data for three of the corporation's most popular products appear below. Ski Guard Golf Guard
Outdoor Luggage Corporation produces hard-sided luggage for sports equipment. Financial data for three of the corporation's most popular products appear below. Ski Guard Golf Guard Fishing Total Guard $ 926,000 $265,000 $ 403,000 $ 258,000 471,000 117,000 202,000 152,000 455,000 148,000 201,000 106,000 Sales Variable manufacturing and selling expenses Contribution margin Fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* Total fixed expenses Net operating income (loss) 69,400 43, 100 115,400 185,200 413, 100 $ 41,900 8,500 20,400 40,100 53,000 122,000 $ 26,000 $ 40, 700 20, 200 7,200 15,500 38,500 36,800 80,600 51,600 167,000 124, 100 34,000 $(18,100) *Allocated on the basis of sales dollars. Management is concerned about the continued losses shown by the fishing guards and wants a recommendation as to whether or not the line should be discontinued. The special equipment used to produce fishing guards has no resale value and does not wear out. Required: 1. What is the financial advantage (disadvantage) per quarter of discontinuing the fishing guard model? 2. Should the production and sale of fishing guards be discontinued? 3. Prepare a properly formatted segmented income statement that would be more useful to management in assessing the long-run profitability of the various product lines. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3
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