Green Lawn Industries has three product lines of sprinklers that it manufactures: Oscillating, Rotary, and Traveling. The
Question:
Green Lawn Industries has three product lines of sprinklers that it manufactures: Oscillating, Rotary, and Traveling. The following is an income statement for each of the three product lines for the year ended December 31, 2019:
Oscillating | Rotary | Traveling | Total | |
Sales | $375,000 | $232,500 | $300,000 | $907,500 |
Cost of Goods Sold | (123,000) | (182,500) | (127,500) | (433,000) |
Sales Commission | (33,000) | (32,500) | (30,000) | (95,500) |
Contribution Margin | 219,000 | 17,500 | 142,500 | 379,000 |
Advertising expense (specific to each individual segment) | (27,000) | (7,500) | 0 | (34,500) |
General Fixed Operations Expense | (30,000) | (30,000) | (30,000) | (90,000) |
Net income (loss) | $162,000 | $(20,000) | $112,500 | $254,500 |
Required:
What is the effect on Green Lawn Industries profitability if they eliminate the Rotary product line? Should Green Lawn Industries eliminate the Rotary product line?
Confirm your decision by preparing an income statement, assuming that the Rotary product line is eliminated.
Expert Answer:
aVariable cost varies with number of units produced or sold thus it will not be incurred if product ... View the full answer
