Problem 4. Naturally Pretty is a local nursery that has three product lines. Bushes is the most recent addition and has been underperforming expectations. Contribution income statements follow.

Variable costing include the cost to acquire the seeds, potting soil and pots to get the plants started in life. Salaries are for the gardeners who care for the grown plants, advertising is done for each product line in order to carefully target the appropriate market, fertilizer is to keep the plants healthy while they await adoption and land is an allocation of the total area that the firm occupies.

What would be the impact on net income of the firm as a whole if it decides to drop bushes as a product line?

Grasses 250,000 75,000 175,000 Cacti 467,000 280,200 186,800 Bushes 225,000 123,750 101,250 Sales VC CM FC Salaries Advertising Fertilizer Land Total Fixed Costs NI 75,000 25,000 8,000 10,000 118,000 57,000 47,000 30,000 2,000 25,000 104,000 82,800 62,500 35,000 14,000 15,000 126,500 (25,250)