Petes Pets is an independent pet store located in Hoboken, New Jersey. Pete collects and reports operating

Pete’s Pets is an independent pet store located in Hoboken, New Jersey. Pete collects and reports operating data by “product line,” with all revenues and costs being placed into one of three summary categories: (1) dogs, (2) cats, (3) birds & fish. For the most recent year of operations, Pete reported the following results:

While pleased with his overall profit and the profit on dogs and cats, Pete is concerned about the loss on birds and fish. He is thinking about discontinuing the birds and fish product line, and using the space to expand his offering of dogs and cats and their related supplies. Pete believes this option would increase both dog and cat revenue by 12%; however, it would also increase dog-related traceable fixed costs by $12,500 and cat-related traceable fixed costs by $8,000.

Required:
a. Using the gross approach, evaluate whether Pete should discontinue the birds and fish product line.
b. For decision-making purposes, do you believe Pete needs more detailed information than is currently provided in his financial statements?Why?

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Cats $218,000 $142,500 8720042,750 Dogs Birds & Fish Revenuc Variable costs Contribution margin Traceable fixed costs Common fixed costs Profit Total S92,500 S453,000 176.200 $46,250 $276,800 27500 81.600 35,000105,000 (S16.250 $90.200 46250 176200 S130,800S99,750 31.500 35,000 22.600 35.000 Common fixed costs relate to rent. Since dogs, cats, and birds and fish each use one-third of the available space, Pete allocates these costs equally among the three pet-related