Shown below is a segmented income statement for Mullett Marinas three main boating service lines: Relevant fixed
Question:
Shown below is a segmented income statement for Mullett Marina’s three main boating service lines:
Relevant fixed costs associated with this line include 70% of Boat Maintenance’s garage/warehouse rent and 40% of Boat Maintenance’s supervision salaries. In addition, assume that dropping the Boat Maintenance service line would reduce sales of the Winter Storage line by 10% and sales of the Boat Fuel & Concessions line by 5%. All other information remains the same.
Required:
1. If the Boat Maintenance service line is dropped, what is the contribution margin for the Boat Fuel & Concessions line? For the Winter Storage line?
2. Which alternative (keep or drop the Boat Maintenance line) is now more cost effective and by how much?
Step by Step Answer:
Managerial Accounting The Cornerstone Of Business Decision Making
ISBN: 9780357715345
8th Edition
Authors: Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger