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Swanson Inc. manufactures wooden furniture. It currently makes two products: Chairs and Cribs. It is considering eliminating Cribs because the product line is unprofitable.
Swanson Inc. manufactures wooden furniture. It currently makes two products: Chairs and Cribs. It is considering eliminating Cribs because the product line is unprofitable. The company's most recent contribution margin income statement is as follows: Swanson Inc. Contribution Margin Income Statement Total (Company) Chairs Cribs Sales Revenue $140,000 $100,000 $40,000 Less: Variable 117,000 80,000 37,000 Costs Contribution 23,000 20,000 3,000 Margin Less: Fixed Costs 15,000 7,000 8,000 Net Operating $8,000 $13,000 ($5,000) Income If Swanson Inc. eliminates Cribs, $3,000 of fixed costs will not be eliminated. Compute change in Swanson Inc's net operating income be if Cribs is eliminated.
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