2. Bubba's Western Wear is considering dropping its line of boots, which is showing a loss,...

 

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2. Bubba's Western Wear is considering dropping its line of boots, which is showing a loss, based on the following statements: Shirts Hats Boots Total Revenue $110,000 $60,000 $35,000 $205,000 Less COGS: $55,000 $40,500 $30,000 $125,500 Gross Margin $55,000 $19,500 $5,000 $79,500 Less S&A Commission 5,500 24.500 Operating Income $25,000 3,000 6.700 $9,800 1,750 6.250 ($3,000) 10,250 37.450 $31,800 Fixed Additional Information: Of the total COGS, $14,750 is fixed. None of this amount can be avoided if the boot line is dropped. The variable manufacturing costs, by line are: Shirts, $48,000; Hats, $36,250; Boots, $26,500. The commission is a variable selling cost. It is based on a fixed percentage of revenue. The following fixed selling costs are direct to the product lines, and could be avoided if the line was dropped: Shirts, $16,000; Hats, $5,000; and Boots, $6,000. A. Based on quantitative factors, should Bubba drop the boot line? 2. Bubba's Western Wear is considering dropping its line of boots, which is showing a loss, based on the following statements: Shirts Hats Boots Total Revenue $110,000 $60,000 $35,000 $205,000 Less COGS: $55,000 $40,500 $30,000 $125,500 Gross Margin $55,000 $19,500 $5,000 $79,500 Less S&A Commission 5,500 24.500 Operating Income $25,000 3,000 6.700 $9,800 1,750 6.250 ($3,000) 10,250 37.450 $31,800 Fixed Additional Information: Of the total COGS, $14,750 is fixed. None of this amount can be avoided if the boot line is dropped. The variable manufacturing costs, by line are: Shirts, $48,000; Hats, $36,250; Boots, $26,500. The commission is a variable selling cost. It is based on a fixed percentage of revenue. The following fixed selling costs are direct to the product lines, and could be avoided if the line was dropped: Shirts, $16,000; Hats, $5,000; and Boots, $6,000. A. Based on quantitative factors, should Bubba drop the boot line?