Question
The following segmented annual income statement is for Quality Bikes LLC. Assume allocated fixed costs are based on sales revenue for each product line as
The following segmented annual income statement is for Quality Bikes LLC.
Assume allocated fixed costs are based on sales revenue for each product line as a proportion of total sales revenue. Quality Bikes is considering dropping one of its unprofitable product lines. Which product line should Quality Bikes drop?
The Adult product line since it reduces company profit by $27,000.
The Youth product line since it reduces company profit by $12,000.
All product lines should be dropped since all products incur a loss for the company.
No product lines should be dropped since all products are profitable for the company.
Product Lines
Product Lines
| Youth | Teen | Adult | Total | |
| Sales revenue | $75,000 | $300,000 | $375,000 | $750,000 |
| Variable costs | 45,000 | 150,000 | 255,000 | 450,000 |
| Contribution margin | $30,000 | $150,000 | $120,000 | $300,000 |
| Direct fixed costs | 12,000 | 18,000 | 27,000 | 57,000 |
| Allocated fixed costs | ? | ? | ? | 105,000 |
| Profit (loss) | $ ? | $ ? | $ ? | $ ? |
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Audit Firm Size And Audit Quality In Nigeria An Empirical Review
Authors: LAP Lambert
1st Edition
6139825466, 978-6139825462
