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Title: The management accountant for the Awesome Candy Company has prepared the following income statement ... Post by: pduvin on Nov 7, 2017 The management accountant for the Awesome Candy Company has prepared the following income statement for the most current year:
Chocolate Other Candy Fudge Total Sales $50,000 $15,000 $40,000 $105,000 Cost of goods sold 24,000 8,000 19,000 51,000 Contribution margin $26,000 $7,000 $21,000 $54,000 Delivery and ordering costs 1,000 500 800 2,300 Rent (per sq. metre used*) 5,000 3,000 4,000 12,000 Allocated corporate costs 5,000 5,000 5,000 15,000 Corporate profit $15,000 $(1,500) $11,200 $24,700 * The company pays for the entire space and allocates based on sq. metres used. 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? Title: Re: The management accountant for the Awesome Candy Company has prepared the following income ... Post by: Munihasen on Nov 7, 2017 a. No, I would not recommend discontinuing the Other Candy product line because this product line contributes $6,500 towards corporate costs and profits.
$7,000 - $500 = $6,500 Without the Other Candy product line, corporate profits would be $6,500 less than currently reported. b. If the Chocolate product line were discontinued, corporate profits would immediately decrease by $25,000. $26,000 - $1,000 = $25,000 |