Question
The condensed income statement for Lakeshore Inc. for the past year is presented as follows: Pumpkin Spice Chocolate Vanilla Totals Sales $500,000 $750,000 $630,000 $1,880,000
The condensed income statement for Lakeshore Inc. for the past year is presented as follows: Pumpkin Spice Chocolate Vanilla Totals Sales $500,000 $750,000 $630,000 $1,880,000 Less Variable Costs 275,000 430,000 290,000 995,000 Contribution Margin 225,000 320,000 340,000 885,000 Less Fixed Costs 245,000 130,000 140,000 515,000 Income(loss) from operations $ (20,000) $190,000 $200,000 $ 370,000 Management is considering the discontinuance of the manufacture and sale of Pumpkin Spice gelato at the beginning of the current year. The discontinuance would have no effect on the total fixed costs and expenses or on the sales of Chocolate and Vanilla. What is the amount of change in net income for the current year that will result from the discontinuance of the Pumpkin Spice flavor? (SHOW YOUR WORK!) Should I continue with Pumpkin Spice? Yes or No (need to decide).
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