Licnep Itd has three major product lines soda juice and ice cream. Licnep is considering discontinuing producing ice cream because the divisional income statement indicates it is being sold at a loss. The most recent annual income statement is outlined below.

	Soda	Juice	Ice Cream
Sales	48,330,000	44,980,000	26,230,000
Variable Cost	16,500,000	19,600,000	12,700,000
Fixed Cost	21,800,000	24,400,000	18,300,000
Operating Income	10,030,000	980,000	-4770000

The fixed costs include fixed costs directly attributable to each product line as well as allocated common costs. The portion of directly attributable fixed costs included in total fixed costs is 40% for soda; 75% for juice and 55% for ice cream.

Should Lincep Ltd discontinue making Ice cream? why?

Answer rating: 100% (QA)

No Licnep Ltd should not discontinue making ice cream The divisional income statement shows that the ... View the full answer