Handley Village sells home, and office furniture. Currently the home product line takes up approximately 50...

Transcribed Image Text:

Handley Village sells home, and office furniture. Currently the home product line takes up approximately 50 percent of the company's retail floor space. The president of Handley Village is trying to decide whether the company should continue offering office furniture or concentrate on home furniture. Below is a product line income statement for the company. If office furniture is dropped, salaries and other direct fixed costs can be avoided. In addition, sales of home furniture can increase by 15 percent without affecting direct fixed costs. Allocated fixed costs are assigned based on relative sales. Home Office Furniture Furniture Total Sales $1,450,000 $1,116,500 $2,566,500 Less cost of goods sold 942,500 812,000 1,754,500 Contribution margin 507,500 304,500 812,000 Less direct fixed costs: Salaries 182,700 182,700 365,400 Other 55,825 55,825 111,650 Less allocated fixed costs: Rent 12,800 11,245 24,045 Insurance 3,370 2,799 6,169 Cleaning 3,540 2,982 6,522 President's salary 76,380 59,701 136,081 Other 6,410 5,089 11,499 Net income / (loss) $166,475 $(15,841) $150,634 Determine whether Handley Village should discontinue the office furniture line and the financial benefit (cost) of dropping it. (Round answer to 0 decimal places, e.g. 5,275.) Net income without Office Furniture is $ . The companyv the Home Office Furniture should drop should not drop Handley Village sells home, and office furniture. Currently the home product line takes up approximately 50 percent of the company's retail floor space. The president of Handley Village is trying to decide whether the company should continue offering office furniture or concentrate on home furniture. Below is a product line income statement for the company. If office furniture is dropped, salaries and other direct fixed costs can be avoided. In addition, sales of home furniture can increase by 15 percent without affecting direct fixed costs. Allocated fixed costs are assigned based on relative sales. Home Office Furniture Furniture Total Sales $1,450,000 $1,116,500 $2,566,500 Less cost of goods sold 942,500 812,000 1,754,500 Contribution margin 507,500 304,500 812,000 Less direct fixed costs: Salaries 182,700 182,700 365,400 Other 55,825 55,825 111,650 Less allocated fixed costs: Rent 12,800 11,245 24,045 Insurance 3,370 2,799 6,169 Cleaning 3,540 2,982 6,522 President's salary 76,380 59,701 136,081 Other 6,410 5,089 11,499 Net income / (loss) $166,475 $(15,841) $150,634 Determine whether Handley Village should discontinue the office furniture line and the financial benefit (cost) of dropping it. (Round answer to 0 decimal places, e.g. 5,275.) Net income without Office Furniture is $ . The companyv the Home Office Furniture should drop should not drop

Answer rating: 100% (QA)

Loss of contribution margin of office furniture 304500 Incre... View the full answer