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wallyboy wallyboy
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7 months ago
Brown Manufacturing makes single kayaks, double kayaks, and lightweight competitive kayaks. The double kayak line has been showing losses for several years, and management is considering dropping the line. Recent income statements have been very similar to the following information which was prepared for the most recent year:

​​SingleDoubleCompetitiveTotal
Sales$687,500$400,000$1,037,500$2,125,000
Variable costs446,875272,000850,7501,569,625
Contribution margin240,625128,000186,750555,375
Fixed costs156,250162,500   143,750   462,500
Operating income$   84,375$(34,500)$     43,000$    92,875

Of the fixed costs, $393,750 is common costs that have been allocated equally to each product line. What will total operating income be if Brown drops the double kayak line?

▸ $(3,875)

▸ $96,750

▸ $33,625

▸ $127,375
Textbook 
Managerial Accounting

Managerial Accounting


Edition: 4th
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angelofavariceangelofavarice
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7 months ago
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More solutions for this book are available here
$(3,875)

$393,750 ÷ 3 = $131,250 to be absorbed by remaining product lines;
($84,375 + $43,000) - $131,250 = ($3,875) Operating loss
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wallyboy Author
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7 months ago
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Jadakiss
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