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Structuring a Keep-or-Drop Product Line Problem with Complementary Effects Shown below is a segmented income statement for Hickory Company's three wooden flooring product lines: Strip
Structuring a Keep-or-Drop Product Line Problem with Complementary Effects Shown below is a segmented income statement for Hickory Company's three wooden flooring product lines: Strip Plank Parquet Total Sales revenue $400.000 $200,000 $300,000 $900,000 Less: Variable expenses 225.000 120.000 250.000 595,000 Contribution margin $175.000 $80,000 $ 30,000 $305,000 Less direct fed expenses Machinerent (5.000) (20.000) (30,000) (55.000) Supervision (15.000) (10.000) (5.000) (30,000) Depreciation (35.000) (10.000) (25,000) (70,000) Segment margin $120.000 $40.000 $ (10,000) $150,000 Hickory's management is deciding whether to keep or drop the parquet product the Hickory's parquet flooring product line has e contribution margin of $50.000 (as of $300.000 es total variable costs of $250.000). All variable costs are relevant Relevant for conta asociated with this line include 80% of parquet's machinerent and all of parquet's supervision alares. In addition assume tha drople the parquet product line would reduce sales of the strip line by 2456 and sales of the planne by 2014 other information remains the same Required: 1. If the parquet product line is dropped. what is the contribution margin for the spine 133.000 For the plank line $ 64.000 2. Which temave perdre the art product line) snow more confectand by how much
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