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Wiams Products Inc. manufactures and sells a number of items, including school knapsacks. The company has been experiencing losses on the knapsacks for some time,
Wiams Products Inc. manufactures and sells a number of items, including school knapsacks. The company has been experiencing losses on the knapsacks for some time, as shown by the contribution format income statement below. $ 290,000 WILLIAMS PRODUCTS INC. Income Statement School Knapsacks For the Quarter Ended June 30 Sales Variable expenses Variable manufacturing expenses $ 81,200 Sales Commissions 31.900 Shipping 8.700 Total variable expenses 121.800 168,200 Contribution margin Tixed expenses: Salary of product-line manager General factory overhead Depreciation of equipment (no resale value) Advertising traceable Insurance on inventories Purchasing department 11,250 57,850 22,000 53,950 33,6401 Total fixed expenses 183.490 Operating loss (15,290 ) "Allocated on the basis of machine-hours. TAllocated on the basis of sales dollars. Discontinuing the knapsacks would not affect sales of other product lines and would have no noticeable effect on the company's total general factory overhead or total purchasing department expenses. Required: a. Compute the increase or decrease of net operating Income If the Williams Products Inc line is continued or discontinued. input all amounts as positive except Decreases in Sales, Decreases in Contribution Margin, and Net Losses which should be indicated by a minus sign.) School School Income Knapsack Knapsack Increase (Decrease Sales Variable expenses: Variable manufacturing expenses Sales commissions Shipping Total variable expenses 0 Contribution margin 0 Foxed expenses: Salary of product-line manager General factory Overhead Depreciation of equipment Advertising traceable Insurance on inventories Purchasing department Totalfixed expenses 000 Operating loss $ $ $ b. Would you recommend that the Williams Products Incline be discontinued
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