Delicious Gourmet Chocolates has two product lines, milk chocolate bars and chocolate covered almonds. The company...
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Delicious Gourmet Chocolates has two product lines, milk chocolate bars and chocolate covered almonds. The company is not doing as well as hoped as shown in the following income statement. Sales Variable Expenses Fixed Expenses Operating income 200,000 104,000 90,000 6,000 Additional information: Sales for chocolate bars and chocolate almonds are $80,000 and $120,000, respectively. The company focuses on using organic high quality almonds in this product line and thus variable expenses are 65% of sales. Since chocolate almonds is a newer product, the company has been advertising more aggressively. Thus, the traceable fixed costs for this product line are $30,000. Corporate fixed costs total $10,000. Required: a. What is the impact to operating income if the company were to drop the chocolate almonds produc line? b. Should the company drop the product line? Delicious Gourmet Chocolates has two product lines, milk chocolate bars and chocolate covered almonds. The company is not doing as well as hoped as shown in the following income statement. Sales Variable Expenses Fixed Expenses Operating income 200,000 104,000 90,000 6,000 Additional information: Sales for chocolate bars and chocolate almonds are $80,000 and $120,000, respectively. The company focuses on using organic high quality almonds in this product line and thus variable expenses are 65% of sales. Since chocolate almonds is a newer product, the company has been advertising more aggressively. Thus, the traceable fixed costs for this product line are $30,000. Corporate fixed costs total $10,000. Required: a. What is the impact to operating income if the company were to drop the chocolate almonds produc line? b. Should the company drop the product line?
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a If the company were to drop the chocolate almonds product line the impact to operating income can ... View the full answer
Related Book For
Intermediate Accounting Reporting and Analysis
ISBN: 978-1285453828
2nd edition
Authors: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Posted Date:
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