Question
The information below was extracted from the books of Battle Field Ltd for the year ended December 31, 2019. Battle Field Ltd. Condensed Income Statement
The information below was extracted from the books of Battle Field Ltd for the year ended December 31, 2019.
Battle Field Ltd.
Condensed Income Statement
For the Year Ended December 31, 2019
Sardines GHS
Tuna Flakes GHS
Oatmeal GHS
Total GHS
Sales
500,000
400,000
100,000
1,000,000
Costs of goods sold:
Variable costs
220,000
200,000
60,000
480,000
Fixed costs
120,000
80,000
20,000
220,000
Total cost of goods sold
340,000
280,000
80,000
700,000
Gross profit
160,000
120,000
20,000
300,000
Operating expenses:
Variable expenses
95,000
60,000
25,000
180,000
Fixed expenses
25,000
20,000
6,000
51,000
Total operating expenses
120,000
80,000
31,000
231,000
Income (loss) from operations
40,000
40,000
(11,000)
69,000
Management is contemplating on whether or not to discontinue Oatmeal.
Required:
a.Advise management whether or not to discontinue Oatmeal and support your answer with calculations depicting the contribution derived from Oatmeal and the effect of discontinuing oatmeal on overall profits of battle field Limited.
b.Most Management decisions are affected by the nature, purpose and behavior of costs. You have been tasked by the management of battlefield Limited to educate the staff of its Accounts department on the effects of the various classifications of costs on their decisions. Organize your notes for this presentation.
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Financial Reporting And Analysis
Authors: Lawrence Revsine, Daniel Collins
4th Edition
0073527092, 978-0073527093
