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The management accountant for Martha's Book Store has prepared the following income statement for the most current year: Cookbook Travel Book Classics Total Sales
The management accountant for Martha's Book Store has prepared the following income statement for the most current year: Cookbook Travel Book Classics Total Sales $60,000 $100,000 $40,000 $200,000 Cost of goods sold 36,000 65,000 20,000 121,000 Contribution margin 24,000 35,000 20,000 79,000 Order and delivery processing 18,000 21,000 8,000 47,000 Rent (per sq. foot used) 2,000 1,000 3,000 6,000 Allocated corporate costs 7,000 7,000 7,000 21,000 Corporate profit $ (3,000) $6,000 $2,000 $5,000 Assume that the allocated corporate costs will not change as a result of any decisions to drop product lines. 1. If the Cookbook product line is eliminated, what is the effect on the total corporate profit of the Company? Show your calculations. 2. If the Travel Book product is discontinued, what would be the effect on the Total Corporate profit of the Company? Show your calculations.
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