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# The management accountant for the Awesome Candy Company has prepared the following income statement ...

wrote...
Posts: 679
Rep:
5 years ago
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?
Textbook

## Cost Accounting: A Managerial Emphasis, Canadian Edition

Edition: 7th
Authors:

### Related Topics

Replies
wrote...
5 years ago
 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 =$6,500Without 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
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