Johnson and Johnson is trying to decide whether to keep each of its two products lines-Product...
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Johnson and Johnson is trying to decide whether to keep each of its two products lines-Product Line A and Product Line B. Following are the operating results for the current year: Sales Variable costs A B Total $390,000$410,000$800,000 190,000 350,000 540,000 Contribution margin$200,000 $ 60,000 $260,000 Fixed costs Profit 250,000 $ 10,000 The total fixed costs of $250,000 include common fixed costs of $120,000. The two product lines have the same amount of segment-specific fixed costs. Required: For each of the following scenarios, determine which product line(s) the company should keep: a. The company wants to maximize its short-term profit. b. The company wants to maximize its long-term profit. Explain the reasoning in detail. (15 points) Johnson and Johnson is trying to decide whether to keep each of its two products lines-Product Line A and Product Line B. Following are the operating results for the current year: Sales Variable costs A B Total $390,000$410,000$800,000 190,000 350,000 540,000 Contribution margin$200,000 $ 60,000 $260,000 Fixed costs Profit 250,000 $ 10,000 The total fixed costs of $250,000 include common fixed costs of $120,000. The two product lines have the same amount of segment-specific fixed costs. Required: For each of the following scenarios, determine which product line(s) the company should keep: a. The company wants to maximize its short-term profit. b. The company wants to maximize its long-term profit. Explain the reasoning in detail. (15 points)
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