Delta Aluminum’s management is considering eliminating product B, which has been showing a loss for several years. The company’s annual income statement, in $000s, is as follows:

a. Restate the income statement in segment margin format.
b. What would be the effect on income if product B were dropped?
c. Management is considering making a new product using product B’s equipment. If the new product’s selling price per unit were $10, its variable costs were $4, and its advertising costs were the same as for product B, how many units of the new product would the company have to sell to make the switch from product B to the new productworthwhile?

  • CreatedFebruary 21, 2014
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