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CarGuru's is a online store with three major product lines: Trucks, SUV's, and Sports Cars. Company management is very concerned about the performance of the
CarGuru's is a online store with three major product lines: Trucks, SUV's, and Sports Cars. Company management is very concerned about the performance of the Sports Cars divison, noting that it seems to be a drag on the company based on its most recent fiscal quarter. A company-wide segmented income statement follows: Sales Variable expenses Trucks $300,000 60,000 SUV's Sports Cars $500,500 $1,000,000 350.000 750.000 Total $1,800,500 1.160.000 Contribution margin 240,000 150,500 250,000 640,500 Fixed expenses 120,000 100.000 300,000 520,000 Operating income (loss) $120.000 $50.500 -$50.000 $120.500 The company notes that if the Sports Cars line were dropped, the other divisions could expect a 10% decrease in foot traffic and sales. Also, $120,000 of the Sports Cars division's fixed costs are allocated and would continue even if the department was dropped. The company has no planned use for the space currently used by the Sports Cars are on the car lot. Required The company notes that if the Sports Cars line were dropped, the other divisions could expect a 10% decrease in foot traffic and sales. Also, $120,000 of the Sports Cars division's fixed costs are allocated and would continue even if the department was dropped. The company has no planned use for the space currently used by the Sports Cars are on the car lot. Required Compute the net dollar advantage or disadvantage of dropping the Sports Cars line
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