Requirements:

• What is the financial advantage (disadvantage) per quarter of discontinuing the Houseware product line?
• Should the production and sale of Houseware product line be discontinued?
• Prepare a properly formatted segmented income statement that would be more useful to management in assessing the long-run profitability of the various product lines

Transcribed Image Text:

Product Line House- Total Drugs Cosmetics wares $250,000 $125,000 105,000 Sales.... $75,000 $50,000 Variable expenses.. 50,000 25,000 30,000 20,000 Contribution margin Fixed expenses: 145,000 75,000 50,000 Salaries... 50,000 29,500 12,500 8,000 1,000 500 Advertising. 15,000 7,500 6,500 Utilities 2,000 500 1,000 Depreciation-fixtures 5,000 20,000 1,000 2,000 2,000 Rent... 10,000 6,000 4,000 Insurance 3,000 2,000 500 500 General administrative. 9,000 6,000 28,000 38,000 $12,000 $ (8,000) 30,000 15,000 Total fixed expenses.. 59,000 125,000 $ 20,000 $ 16,000 Net operating income (loss). Product Line House- Total Drugs Cosmetics wares $250,000 $125,000 105,000 Sales.... $75,000 $50,000 Variable expenses.. 50,000 25,000 30,000 20,000 Contribution margin Fixed expenses: 145,000 75,000 50,000 Salaries... 50,000 29,500 12,500 8,000 1,000 500 Advertising. 15,000 7,500 6,500 Utilities 2,000 500 1,000 Depreciation-fixtures 5,000 20,000 1,000 2,000 2,000 Rent... 10,000 6,000 4,000 Insurance 3,000 2,000 500 500 General administrative. 9,000 6,000 28,000 38,000 $12,000 $ (8,000) 30,000 15,000 Total fixed expenses.. 59,000 125,000 $ 20,000 $ 16,000 Net operating income (loss).

Answer rating: 100% (QA)

Dropping Housewares Department has financial loss The department is able to cover all its variable a... View the full answer