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please answer questions (a) and (b) with explanations Brass Ltd. manufactures three products, Swans, Ducks and Chicks. The present net annual income from each item
please answer questions (a) and (b) with explanations
Brass Ltd. manufactures three products, Swans, Ducks and Chicks. The present net annual income from each item is as follows: Swans Ducks Chicks Total $ $ $ Sales 50.000 40.000 60.000 150.000 Variable costs | 30.000 25.000 35.000 90.000 Contribution 20.000 15.000 25.000 60.000 Fixed costs 17.000 18.000 20.000 55.000 Profit/(loss) 3.000 (3.000) 5.000 5.000 Brass Ltd. is concerned about its poor profit performance, and is considering whether or not to cease selling Ducks. It is felt that selling prices cannot be increased or lowered without adversely affecting net income. $5,000 of the fixed costs of Ducks are direct fixed costs which would be saved if production ceased. All other fixed costs will remain the same. a) Advise Brass Ltd. whether or not to cease production of Ducks. b) Suppose, however, it were possible to use the resources realized by stopping production of Ducks, and switch to produce a new item. Eagles, which would sell for $50,000 and ineur variable costs of $30.000 and extra fixed costs of $6.000. What will the new decision beStep by Step Solution
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