Question

Epicure Products Company reports the results for three lines as follows. Hypogeal Epigeal Aerie Total Company...

  1. Epicure Products Company reports the results for three lines as follows.

Hypogeal

Epigeal

Aerie

Total Company

Sales

$100,000

120,000

96,000

316,000

Variable Costs

50,000

90,000

48,000

188,000

Contribution Margin

50,000

30,000

48,000

128,000

Fixed Costs

40,000

48,000

38,400

126,400

Operating Income

10,000

-18,000

9,600

1,600

Required:

-Management is considering dropping Epigeal product line ot boost earnings. What would happen to earnings if the Epigeal product line were dropped? (Hint: No calculation necessary)

-Now assume that 50% of any product line’s fixed costs would be eliminated if that product line were eliminated, and sales of other product line would be increased by 10%. Would it be profitable to drop Epigeal? How much would operating income change for the company?

-Assuming your analysis indicated that it would increase income to drop Epigeal, what are some reasons you might keep it anyway?

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Ace Company has two product lines. The following income statements are shown for its two product...
Ace Company has two product lines. The following income statements are shown for its two product lines and the company as a whole:       Office Supplies        Computer            Total Sales $250,000 $360,000 $610,000 Less: Variable expenses 100,000 252,000 352,000 Contribution margin $150,000 $108,000 $258,000 Less: Fixed expenses 70,000 120,000 190,000 Operating income $80,000 (12,000) $68,000 Additional information: Management estimates that the dropping of the Computer product line would result in a $50,000 (20%) decrease in sales in the Office Supplies product line....
Thalassines Kataskeves, S.A., of Greece makes marine equipment. The company has been experiencing losses on its...
Thalassines Kataskeves, S.A., of Greece makes marine equipment. The company has been experiencing losses on its bilge pump product line for several years. The most recent quarterly contribution format income statement for the bilge pump product line follows: Thalassines Kataskeves, S.A. Income Statement—Bilge Pump For the Quarter Ended March 31 Sales $ 500,000 Variable expenses: Variable manufacturing expenses $ 126,000 Sales commissions 48,000 Shipping 14,000 Total variable expenses 188,000 Contribution margin 312,000 Fixed expenses: Advertising (for the bilge pump product...
Tremaine Inc. has three product lines: A, B, and C. A B C Total Sales $50,000...
Tremaine Inc. has three product lines: A, B, and C. A B C Total Sales $50,000 $85,000 $90,000 $225,000 Variable costs   30,000   30,000   44,000   104,000 Contribution margin 20,000 55,000 46,000 121,000 Fixed costs   23,000   25,000   18,000     66,000 Net income $ (3,000) $30,000 $28,000 $  55,000 28.  Management is considering dropping product line A. If it is discontinued, $18,000 of its fixed costs are DTFC & can be avoided. The discontinuation of product line A would: a. increase Tremaine net income by $13,000....
Kenmore Company manufactures two products. Both products have the same sales? price, and the volume of...
Kenmore Company manufactures two products. Both products have the same sales? price, and the volume of sales is equivalent.? However, due to the difference in production? processes, Product A has higher variable costs and Product B has higher fixed costs. Management is considering dropping Product B because that product line has an operating loss. Kenmore Company Income Statement Month Ended June 30, 2018 Total Product A Product B Net Sales Revenue $170,000 $85,000 $85,000 Variable Costs 150,000 77,000 73,000 Contribution...
The ABC department store has three major product lines: hardware, clothing, and sporting goods. The store...
The ABC department store has three major product lines: hardware, clothing, and sporting goods. The store is considering dropping the clothing line because the income statement shows that it is operating at a loss. Note the income statement for these product lines below: Hardware Clothing Sporting Goods Total Sales $10,000 $15,000 $25,000 $50,000 Less: Variable costs $6,000 $8,000 $12,000 $26,000 Contribution Margin $4,000 $7,000 $13,000 $24,000 Less: Fixed costs Direct $2,000 $6,500 $4,000 12,500 Allocated $1,000 $1,500 $2,500 $5,000 Total...
Cotrone Beverages makes energy drinks in three flavors: Original, Strawberry, and Orange. The company is currently...
Cotrone Beverages makes energy drinks in three flavors: Original, Strawberry, and Orange. The company is currently operating at 75 percent of capacity. Worried about the company's performance, the company president is considering dropping the Strawberry flavor. If Strawberry is dropped, the revenue associated with it would be lost and the related variable costs saved. In addition, the company's total fixed costs would be reduced by 15 percent. Segmented income statements appear as follows: Product Original Strawberry Orange Sales $ 32,700...
Sunland Company makes three models of tasers. Information on the three products is given below. Tingler...
Sunland Company makes three models of tasers. Information on the three products is given below. Tingler Shocker Stunner Sales $296,000 $504,000 $200,000 Variable expenses 151,700 207,900 138,200 Contribution margin 144,300 296,100 61,800 Fixed expenses 117,800 231,800 95,000 Net income $26,500 $64,300 $(33,200) Fixed expenses consist of $300,000 of common costs allocated to the three products based on relative sales, as well as direct fixed expenses unique to each model of $29,000 (Tingler), $80,600 (Shocker), and $35,000 (Stunner). The common costs...
Cawley Company makes three models of tasers. Information on the three products is given below. Tingler...
Cawley Company makes three models of tasers. Information on the three products is given below. Tingler Shocker Stunner Sales $300,000 $500,000 $200,000 Variable expenses 152,300 207,900 136,000 Contribution margin 147,700 292,100 64,000 Fixed expenses 120,000 229,500 94,300 Net income $27,700 $62,600 $(30,300) Fixed expenses consist of $300,000 of common costs allocated to the three products based on relative sales, as well as direct fixed expenses unique to each model of $30,000 (Tingler), $79,500 (Shocker), and $34,300 (Stunner). The common costs...
Cawley Company makes three models of tasers. Information on the three products is given below Tingler...
Cawley Company makes three models of tasers. Information on the three products is given below Tingler Shocker Stunner Sales $298,600 $497,400 $197,000 Variable expenses 152,300 207,900 136,000 Contribution margin 146,300 289,500 61,000 Fixed expenses 119,881 229,722 93,797 Net income $26,419 $59,778 $(32,797) Fixed expenses consist of $299,900 of common costs allocated to the three products based on relative sales, and additional fixed expenses of $29,700 (Tingler), $79,500 (Shocker), and $34,300 (Stunner). The common costs will be incurred regardless of how...
Cotrone Beverages makes energy drinks in three flavors: Original, Strawberry, and Orange. The company is currently...
Cotrone Beverages makes energy drinks in three flavors: Original, Strawberry, and Orange. The company is currently operating at 75 percent of capacity. Worried about the company's performance, the company president is considering dropping the Strawberry flavor. If Strawberry is dropped, the revenue associated with it would be lost and the related variable costs saved. In addition, the company's total fixed costs would be reduced by 15 percent. Segmented income statements appear as follows: Product Original Strawberry Orange Sales $ 33,300...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT