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PROBLEM 2 While reviewing sales of gift shop items for the past six months, the owner of the Red Mill Inn prepared the analysis shown
PROBLEM 2 | |||||||
While reviewing sales of gift shop items for the past six months, the owner of the Red Mill Inn | |||||||
prepared the analysis shown below. | |||||||
KEY | KITCHEN | SWEAT | |||||
CHAIN | TOWEL | MUG | T-SHIRT | SHIRT | |||
Sales | $ 270.00 | $ 644.40 | $ 742.50 | $ 3,828.00 | $ 3,900.00 | ||
Variable costs | 54.00 | 234.00 | 187.50 | 1,560.00 | 1,680.00 | ||
Contribution Margin | $ 216.00 | $ 410.40 | $ 555.00 | $ 2,268.00 | $ 2,220.00 | ||
Fixed costs | 250.00 | 250.00 | 250.00 | 400.00 | 400.00 | ||
Net Income | $ (34.00) | $ 160.40 | $ 305.00 | $ 1,868.00 | $ 1,820.00 | ||
30% of the fixed costs of each item are avoidable. Show calculations to determine if | |||||||
the key chain product is profitable or not. | |||||||
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