Answer:
Giada's Book Store
The company would have reported a total profit of $19,000, which is $10,000 less.
Explanation:
a) Data and Calculations:
Income statement for the most current year:
Cookbook Travel Book Classics Total
Sales $68,000 $126,000 $53,000 $247,000
Cost of goods sold 40,000 66,000 21,000 127,000
Contribution margin 28,000 60,000 32,000 120,000
Order and delivery processing 21,000 24,000 11,000 56,000
Rent (per sq. foot used) 2,000 5,000 4,000 11,000
Allocated corporate costs 8,000 8,000 8,000 24,000 Corporate profit $ (3,000) $23,000 $9,000 $29,000
Corporate profit = $29,000
less allocated cookbook costs 10,000
Adjusted corporate profit = $19,000
b) Discontinuing the Cookbook product line would have eliminated the contribution the product line makes to defraying Rent and Allocated Corporate costs totalling $10,000 unless the Rental space was a variable cost.
