Question

Current Attempt in Progress Swifty Corporation produces three versions of baseball bats: wood, aluminum, and hard rubber. A condensed segmented income statement for a recent period follows: Wood Aluminum Hard Rubber Total Sales $550000 $240000 $65000 $855000 Variable expenses 345000 180000 58000 583000 Contribution margin 205000 60000 7000 272000 Fixed expenses 75000 35000 22000 132000 Net income (loss) $130000 $ 25000 $(15000) $140000 Assume none of the fixed expenses for the hard rubber line are avoidable. What will be total net income if the line is dropped?

Answer 1

Answer:

None of the fixed costs are avoidable. Therefore the company now loses all the fixed costs and the positive contribution margin.

Explanation:

Giving the following information:

Wood Aluminum Hard Rubber

Total Sales $65000

Variable expenses (58000)

Contribution margin 7000

Fixed expenses  (22000)

Net income (loss) (15000)

Effect on income= -22,000 - 7,000= -29,000

None of the fixed costs are avoidable. Therefore the company now loses all the fixed costs and the positive contribution margin.