A value-driven car manufacturer, Crane, started its business more than 50 years ago, making and selling...

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A value-driven car manufacturer, Crane, started its business more than 50 years ago, making and selling a sedan body style. Sedans were popular at the time, and this one drove the success of Crane for years due to its practical yet stylish nature. As times changed, Crane designed models in different body styles, and those models have outpaced sedans, as follows. Sedan SUV Truck Van Sales $1,207,000 $4,210,000 $3,892,000 $1,998,000 Variable costs 697,000 1,996,000 1,817,000 1,108,000 Contribution margin 510,000 2,214,000 2,075,000 890,000 Fixed costs 816,000 907,000 1,198,000 797,000 Operating income (loss) $(306,000) $1,307,000 $877,000 $93,000 The income statements above reflect the second consecutive year the sedan category has lost money. Crane is concerned about dropping this vehicle, however, since the company's success was originally built on it. (a) Crane believes it can save $612,000 in fixed costs associated with the sedans if it drops that vehicle category. Should the company seriously consider dropping it? How much better or worse off, financially, would it be by dropping the sedan? Crane would be by $ A value-driven car manufacturer, Crane, started its business more than 50 years ago, making and selling a sedan body style. Sedans were popular at the time, and this one drove the success of Crane for years due to its practical yet stylish nature. As times changed, Crane designed models in different body styles, and those models have outpaced sedans, as follows. Sedan SUV Truck Van Sales $1,207,000 $4,210,000 $3,892,000 $1,998,000 Variable costs 697,000 1,996,000 1,817,000 1,108,000 Contribution margin 510,000 2,214,000 2,075,000 890,000 Fixed costs 816,000 907,000 1,198,000 797,000 Operating income (loss) $(306,000) $1,307,000 $877,000 $93,000 The income statements above reflect the second consecutive year the sedan category has lost money. Crane is concerned about dropping this vehicle, however, since the company's success was originally built on it. (a) Crane believes it can save $612,000 in fixed costs associated with the sedans if it drops that vehicle category. Should the company seriously consider dropping it? How much better or worse off, financially, would it be by dropping the sedan? Crane would be by $

Answer rating: 100% (QA)

Currently Cranes income statements show that the sedan category has an operating loss of 306000 and ... View the full answer