Question: 4K Camera is considering eliminating Model EOS1 from its camera line because of losses over the past quarter. The past three months of information for


4K Camera is considering eliminating Model EOS1 from its camera line because of losses over the past quarter. The past three months of information for model EOS1 is summarized below: Manufacturing overhead costs are 70% variable and the remaining 30% is depreciation of special equipment for model EOS1 that has no resale value. Variable selling \& administrative costs are sales commissions associated with the product line. Fixed selling and administrative costs is the amount of senior management costs allocated to the product. Are the sales of the product relevant? [YES, NO, PARTLY] Are the direct material costs of the product relevant? [YES, NO, PARTLY] Are the direct labour costs of the product relevant? [YES, NO, PARTLY] Are the manufacturing overhead costs of the product relevant? [YES, NO, PARTLY] Are the variable selling and administrative costs of the product relevant? [YES, NO, PARTLY] Are the fixed selling and administrative costs of the product relevant? [YES, NO, PARTLY] What is the profitability or loss of the product line if you only include the relevant costs? Should the company keep the product line? [YES, NO]
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