W5 A2 2

2.

Toxemia Salsa Company manufactures five flavors of salsa. Last year, Toxemia generated net operating income of $40,000. The following information was taken from last year's income statement segmented by flavor (brackets indicate a negative amount): Wimpy Mild Medium Hot Atomic

Contribution margin $(2000) $45,000 $35,000 $50,000 $162,000

Segment margin $(16,000) $(5000) $7000 $10,000 $94,000

Segment margin less allocated common fixed expenses

$(26,000) $(15,000) $(3000) $0 $84,000 Toxemia expects similar operating results for the upcoming year. If Toxemia wants to maximize its profitability in the upcoming year, which flavor or flavors should Toxemia discontinue? A no flavors should be discontinued B wimpy C wimpy and mild D wimpy, mild, and medium