Seats Galore sells 3 models of deck chairs: Blue Magoo, Red Ahead, and Green Seen. Operating results for June are below:

 

	Blue Magoo	Red Ahead	Green Seen	Total
Units sold	4,000	4,500	3,500	12,000
Revenue	$36,000	$22,500	$35,000	$93,500
Variable departmental costs	14,000	13,500	17,500	45,000
Direct fixed costs	6,000	4,000	5,000	15,000
Allocated fixed costs	8,000	9,000	7,000	24,000
Net income	$  8,000	($ 4,000)	$  5,500	$  9,500

 

      a.         If Red Ahead is discontinued, management estimates that sales of Blue Magoo will increase by 20%. In good form, prepare an incremental analysis to determine if Red Ahead should be discontinued.

      b.         What qualitative factors should Seats Galore’s managers consider?

      c.         Should Red Ahead be discontinued based solely on quantitative aspects? Briefly justify your response.

      d.         Without creating new income statements, and using your results from your analysis in part A, determine the amount of the company’s new net income if Red Ahead is discontinued. Show your calculations.