Question

Lisah, Inc., manufactures golf clubs in three models. For the year, the Big Bart line has a net loss of $3,800 from sales $201,000, variable costs $175,000, and fixed costs $29,800. If the Big Bart line is eliminated, $19,700 of fixed costs will remain. Prepare an analysis showing whether the Big Bart line should be eliminated. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Continue Eliminate Net Income Increase (Decrease) Sales $enter sales in dollars $enter sales in dollars $enter sales in dollars Variable costs enter variable costs in dollars enter variable costs in dollars enter variable costs in dollars Contribution margin enter a subtotal of the two previous amounts enter a subtotal of the two previous amounts enter a subtotal of the two previous amounts Fixed costs enter fixed costs in dollars enter fixed costs in dollars enter fixed costs in dollars Net Income / (Loss) $enter net income or loss in dollars $enter net income or loss in dollars $enter net income or loss in dollars The Big Bart product line should be

Answer 1

Answer:

The Big Bart product line should be retained

Explanation:

                                      Continue     Eliminate     Net Income

Sales                             $201,000          $0          -$201,000

Variable costs              $175,000           $0           $175,000

Contribution margin    $26,000             $0         -$26,000

Fixed costs                   $29,800          $19,700    $10,100

Net Income / (Loss)   -$3,800            -$19,700   -$15,900

Conclusion; The Big Bart product line should be retained, not eliminated because the Net loss of been eliminated is very negative than to be retained.