Question: PROBLEM 6 - CONTINUE OR DISCONTINUE AN OPERATING SEGMENT Beth Neri Enterprises sells three products, Skinny, Bony and Thinmy. Beth, the proprietor, is concerned about

PROBLEM 6 - CONTINUE OR DISCONTINUE AN OPERATING
PROBLEM 6 - CONTINUE OR DISCONTINUE AN OPERATING SEGMENT Beth Neri Enterprises sells three products, Skinny, Bony and Thinmy. Beth, the proprietor, is concerned about the losses incurred by Thinny, and is considering to discontinue its production and sales Sales and coate data about Beth Neri's three products are as follows Skinny Bony Thinny Total Sales price per unit P 5 P7 P9 P 21 Variable cost per unit 7 12 Contribution margin per unit P 3 P 4 P 2 P9 Fixed cost per unit 3 6 Profit (Loss) per unit P 2 P2 (P 1) P3 Fixed costs are allocated among the three products based on the floor aree they occupy. Beth is thinking that if she would eliminate Thinny, its loss of P1 per unit would likewise be eliminated thereby increasing her total profit per unit from P3 [P2 + P2 - P1] to P4 [P2 + F2]. Te Beth's analysis correct

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