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Xander's Muffins is trying to decide whether or not to continue a particular muffin flavour. The information shown is available for Xander's different muffin ranges.
Xander's Muffins is trying to decide whether or not to continue a particular muffin flavour. The information shown is available for Xander's different muffin ranges. If the range is dropped, the business will not have to pay the fixed costs and reduce the allocated common fixed costs by 80%.
Blueberry | Raspberry White Chocolate | Banana Walnut | |
Sales volume | 500 units | 500 units | 500 units |
Sales price | $4 per unit | $5 per unit | $4.50 per unit |
Variable costs | $1.50 per unit | $1.75 per unit | $1.25 per unit |
Direct fixed costs | 1,000 | 1,000 | 1,000 |
Allocated common fixed costs | 500 | 1500 | 500 |
Net income | -250 | -875 | 125 |
What will be the net profit for Xander's Muffins if the business drops the Banana and Walnut muffins?
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