Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Strip Plank Parquet Total Sales revenue $307,000 $194,000 $306,000 $807,000 Less:Variab|eexpenses 215,000 115,000 240,000 570,000 Contribution margin $172,000 $79,000 $66,000 $317,000 Less direct fixed expenses:
Strip Plank Parquet Total Sales revenue $307,000 $194,000 $306,000 $807,000 Less:Variab|eexpenses 215,000 115,000 240,000 570,000 Contribution margin $172,000 $79,000 $66,000 $317,000 Less direct fixed expenses: Machine rent (6,000] (24,000] (66,000] (96,000) Supervision (15,000] (10,000] [5,000] (30,000) Depreciation (28,000] [8,000] (20,000] (56,000) Segment margin $123,000 $37,000 $95,000] $135,000 Hickory's management is deciding whetherto keep or drop the parquet product line. Hickory's parquet flooring product line has a contribution margin of $66,000 {sales of $305,000 less total variable costs of $240,000]. All variable costs are relevant. Relevant xed costs associated with this line include 80% of parquet's machine rent and all of parquet's supervision salaries. In addition, assume that dropping the parquet product line would reduce sales of the strip line by 10% and sales of | plank line by 10%. All other information remains the same. This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below. Open spreadsheet Required: 1. If the parquet product line is dropped, what is the contribution margin for the strip line? 5 154,300 J For the plank line? 5 71,100 ./ 2. which alternative [keep or drop the parquet product line] is now more cost effective and by how much
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started