Question
Please help! Please give step-by-step calculation. Thank you!! Gary Brown Manufacturing makes single kayaks, double kayaks, and lightweight competitive kayaks. The double kayak line has
Please help! Please give step-by-step calculation. Thank you!!
Gary Brown Manufacturing makes single kayaks, double kayaks, and lightweight competitive kayaks. The double kayak line has been showing losses for several years, and management is considering dropping the line. Recent income statements have been very similar to the following information which was prepared for the most recent year:
Single Double Competitive Total
Sales $687,500 $400,000 $1,037,500 $2,125,000
Variable costs 446,875 272,000 850,750 1,569,625
Contribution margin 240,625 128,000 186,750 555,375
Fixed costs 156,250 162,500 143,750 462,500
Operating income $84,375 $(34,500) $43,000 $92,875
Of the fixed costs, $393,750 is common costs that have been allocated equally to each product line. What will total operating income be if Brown drops the double kayak line?
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