A B C D " a H K 4 3 Ch. 9 Review Problem 1 modified 2 Charter Sports Equipment manufactures round, rectangular, and octagonal trampolines. Data for the past month follows: 3 Trampolines Round Rectangular Octagonal 6 Sales Total $1,000,000 $140,000 $500,000 $360,000 7 Less: variable expenses 410,000 60,000 200,000 150,000 Contribution margin 590,000 80,000 300,000 210,000 9. Less: fixed expenses 10 Advertising traceable" 216,000 41,000 110,000 65,000 "1 Depreciation of special equipment 95,000 20,000 40,000 35,000 12 Line supervisors' salaries 19,000 6,000 7,000 6,000 13 General factory overhead** 200,000 28.000 100,000 72.000 14 Total fixed expenses 530,000 95,000 257,000 178,000 15 Net operating income (loss) $60,000 -$15.000 $43,000 $32.000 16 Relate to the specific trampoline model 17 A common cost allocated on the basis of sales dollars 18 Management is concerned about the continued losses shown by the round trampolines and wants a recommendation as to whether the line should be discontinued 19 The special equipment used to produce the trampolines has no resale value. If the round trampoline model is dropped, the two line supervisors assigned to the model will be discharged. 20 21 Required: 22 23 Should production and sale of the round trampolines be discontinued? You may assume that the company has no other use for the capacity used to produce the round trampolines. Show supporting calculations. 24 Step 1: Determine what is relevant to the decision. (5 marks) 25 Answer sheet New De