Refer to Hickory Companys segmented income statement in Cornerstone Exercise 13- 15. Assume that dropping the parquet

Question:

Refer to Hickory Company’s segmented income statement in Cornerstone Exercise 13- 15. Assume that dropping the parquet product line would reduce sales of the strip line by 25 percent and sales of the plank line by 20 percent. All other information remains the same.

Required:
1. If the parquet product line is dropped, what is the for the strip line? For the plank line?
2. Which alternative (keep or drop the parquet product line) is now more cost effective and by how much?

Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...