SNAP GUM CO. EGG NOG BUBBLE GUM CHOCOLATE-MINT 3UBBLE GUM GREEN APPLE BUBBLE GUM $200,000 50,000 200,000 $600, 000 250,000 200,000 $520, 000 250,000 200,000 REVENUE VARIABLE COSTS FIXED COSTS *The Snap Gum Company's total fixed overhead consists of $600,000, which for analysis purposes is simply allocated equally to all gum product 1ines. INSTRUCTIONS: Find the Net Income for each gum line. CHOCOLATE-MINT GREEN APPLE BUBBLE GUM EGG NOG BUBBLE GUM BUBBLE GUM REVENUE -VARIABLE COSTS CONTRIBUTION MARGIN -FIXED COSTS NET INCOME 2. Based upon the financial accounting's absorption costing used to make the product-line income statements in instruction 1 above, make a decision about which product lines to keep using financial accounting ideas only Make new product-line income statements to find the new Net Income figures for the gums you are keeping 3. Your boss now has given you "orders"to drop any product line that is still not showing a financial accounting profit!(He says he's had "Principles of Accounting I- Financial Accounting" and knows what's going on!) Make a new income statement to show your boss what will happen if you follow his directive. Explain what is going on to your boss. (Hint Review your understanding of contribation margin!)