A company is thinking about dropping one of its product lines. The monthly income statement for the
Fantastic news! We've Found the answer you've been seeking!
Question:
A company is thinking about dropping one of its product lines. The monthly income statement for the product line is below:
Revenue $
Variable Costs $
Salary of Product Line Manager $
Depreciation $
Rent factory space $
Corporate overhead allocation $
The company provides the following additional information:
The depreciation above is for specialized machinery that would be disposed of if the product line were dropped.
The company produces this product in a factory where some of its other products are also produced, so the company would need to continue renting the factory if this product line were dropped.
Corporate overhead is allocated to each product line based on total sales revenue, but total corporate overhead does not change when a product line is introduced or dropped.
What is the total expected monthly financial impact for the company ie how will cash flows change if they drop this product? Indicate an increase with a positive number and a decrease with a negative number.
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date: