The income statement information for Wildhorse follows:

		Premium			Regular				Royal			Total
Sales units		75 kg			75 kg				75 kg			225 kg
Sales		$	1,650		$	1,200			$	1,350		$	4,200
Variable costs			1,050			750				810			2,610
Contribution margin			600			450				540			1,590
Production line fixed costs*			480			544				390			1,414
Corporate costs (allocated)**			68			60				79			207
Total fixed costs			548			604				469			1,621
Operating income (loss)		$	52		$	(154	)		$	71		$	(31	)

*		If the company drops the product, these costs are no longer incurred.
**		None of these corporate costs are expected to change if a product line is dropped.

Using the general decision rule, which product should the corporation emphasize?

Emphasis order Royal, then Premium, then RegularRegular, then Royal, then PremiumRegular, then Premium, then RoyalRoyal, then Regular, then PremiumPremium, then Royal, then RegularPremium, then Regular, then Royal

Using the general decision rule, should the corporation drop Regular (assuming no changes in demand for other products)? Show how operating income would change if Regular were dropped. (Show a loss preceded by a minus sign, e.g. -200 or (200).)

Regular should notshould be dropped.

Operating income/(loss)

$

At what point (in kg) would the managers be indifferent to dropping Regular? In other words, what is the breakeven point for Regular? (Round answer to 0 decimal places, e.g. 125.)

Breakeven point

kg

Answer rating: 100% (QA)

Answer1 Corporation should emphasis Royal product as it provides highest income 71 Answer2 Yes r... View the full answer