Structuring a Keep-or-Drop Product Line Problem Shown below is a segmented income statement for Orzo Company's three laminated flooring product lines: Sales revenue Less: Variable expenses Contribution margin Less direct fixed expenses: Machine rent Supervision Depreciation Strip $400,000 225,000 $175,000 5,000 15,000 35,000 Plank $120,000 Check My Work $200,000 120,000 43,000 20,000 25,000 Segment margin $ (38,000) Orzo's management is deciding whether to keep or drop the parquet product line. Orzo's parquet flooring product line has a contribution margin of $50,000 (sales of $300,000 less total variable costs of $250,000). All variable costs are relevant. Relevant fixed costs associated with this line include $43,000 in machine rent and $4,900 in supervision salaries. $ 80,000 20,000 10,000 10,000 $ 40,000 Parquet Required: 1. List the alternatives being considered with respect to the parquet flooring line. Dop the parquet flooring line or keep it 3. Which alternative is more cost effective and by how much? Keep by s $300,000 $900,000 250,000 595,000 $ 50,000 $305,000 2. List the relevant benefits and costs for keeping the parquet flooring line. Sales, variable cost, supervision cost and machine rent Total 68,000 45,000 70,000 $122,000 Previous Next

Structuring a Keep-or-Orop Product Line Problem Shown below is a segmented income statement for Orzo Company's three laminated flooring product lines: Orzo's management is deciding whether to ketp or drop the parquet product ine. Orzo's parquet flooring product fine has a contribution margin of s50,000 (sales af $ ) 00,000 sarien. Required! 1. Ust the alfematives being considered with respect to the parquet nooring ine: 2. List the relevent benefis and costs for ketping the parquet fooring line. Sales, variable cont, supervivion cout and machiae rent 3. Which alternative is more cest effective and by how much? by 1 Structuring a Keep-or-Orop Product Line Problem Shown below is a segmented income statement for Orzo Company's three laminated flooring product lines: Orzo's management is deciding whether to ketp or drop the parquet product ine. Orzo's parquet flooring product fine has a contribution margin of s50,000 (sales af $ ) 00,000 sarien. Required! 1. Ust the alfematives being considered with respect to the parquet nooring ine: 2. List the relevent benefis and costs for ketping the parquet fooring line. Sales, variable cont, supervivion cout and machiae rent 3. Which alternative is more cest effective and by how much? by 1