Question
The management accountant for the Chocolate S'more Company has prepared the following income statement for the most current year: Chocolate Other Candy Fudge Total Sales$40,000$25,000$35,000$100,000
The management accountant for the Chocolate S'more Company has prepared the following income statement for the most current year:
ChocolateOther CandyFudgeTotal
Sales$40,000$25,000$35,000$100,000
Cost of goods sold26,00015,00019,00060,000
Contribution margin14,00010,00016,00040,000
Delivery and ordering costs2,0003,0002,0007,000
Rent (per sq. foot used)3,0004,0002,0009,000
Allocated corporate costs5,0005,0005,00015,000
Corporate profit$4,000$(2,000)$7,000$9,000
a. - Do you recommend discontinuing the Other Candy product line? Why or why not?
.
b. - If the Chocolate product line had been discontinued, corporate profits for the current year would have decreased by what amount?
c. - What ethical issues would you consider in closing a department or division in a company?
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