Please complete all parts!!
Mohave Corporation is considering eliminating a product from its Sand Trap line of beach umbrellas. This collection is aimed at people who spend time on the beach or have an outdoor patio near the beach. Two products, the Indigo and Verde umbrellas, have impressive sales. However, sales for the Azul model have been dismal. Mohave's information related to the Sand Trap line is shown as follows. Segmented Income Statement for Mohave's Sand Trap Beach Umbrella Products Azul $ 30,000 Sales revenue Variable costs Indigo $ 60,000 34,000 $ 26,000 1,900 Total $ 150,000 91,000 Contribution margin Verde $ 60,000 31,000 $ 29,000 2,500 $ 26,500 17,840 $ 8,660 26,000 $ 4,000 2,000 $ 2,000 8,920 $ 59,000 6,400 Less: Direct fixed costs. Segment margin $ 24,100 17,840 $ 6,260 $ 52,600 44,600 Common fixed costs* Net operating income (loss) $ (6,920) $ 8,000 *Allocated based on total sales revenue Mohave determined that eliminating the Azul model would cause sales of the Indigo and Verde models to increase by 10 percent and 15 percent, respectively. Variable costs for these two models would increase proportionately. Although the direct fixed costs could be eliminated, the common fixed costs are unavoidable. The common fixed costs would be redistributed to the remaining two products. Required: 1-a. Complete the table given below, assuming Mohave Corporation drops the Azul line. 1-b. Will Mohave's net operating income increase or decrease if the Azul model is eliminated? By how much? 2. Should Mohave drop the Azul model? 3-a. Complete the table given below assuming that Mohave had no direct fixed overhead in its production information and the entire $51,000 of fixed cost was common fixed cost. 3-b. Should Mohave drop the Azul model? 3-c. What is the increase or decrease in the net operating income of Mohave? Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 2 Req 3A Req 3B Req 3C Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 2 Req 3A Req 3B Req 3C Complete the table given below, assuming Mohave Corporation drops the Azul line. Note: Do not round intermediate calculations. Round Common Fixed Costs to the nearest whole dollar. Indigo Verde Total Sales Revenue Variable Costs Contribution Margin Direct Fixed Costs Segment Margin Common Fixed Costs Net Operating Income (Loss) Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 2 Req 3A Req 3B Req 3C Will Mohave's net operating income increase or decrease if the Azul model is eliminated? By how much? Change in Net Operating Income (Loss) Req 1A Req 1B Req 2 Should Mohave drop the Azul model? Should Mohave drop the Azul model? Req 3A Complete the table given below assuming that Mohave had no direct fixed overhead in its production information and the entire $51,000 of fixed cost was common fixed cost. Change in Contribution Margin Contribution Margin Gained on Indigo Contribution Margin Gained on Verde Contribution Margin Lost on Azul Net Increase in Contribution Margin Change in Fixed Costs Net Change in Profit if Azul is Eliminated Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 2 Req 3A Req 3B Req 3C Should Mohave drop the Azul model? Should Mohave drop the Azul model? Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 2 Req 3A Req 3B Req 3C What is the increase or decrease in the net operating income of Mohave? Change in Net Operating Income (Loss)
