Homework Clinic

Social Science Clinic => Accounting => Topic started by: jrubin on Mar 6, 2021

Title: The management accountant for the Chocolate S'more Company has prepared the following income ...
Post by: jrubin on Mar 6, 2021
The management accountant for the Chocolate S'more Company has prepared the following income statement for the most current year: 

ChocolateOther CandyFudgeTotal
Sales$40,000$25,000$35,000$100,000
Cost of goods sold26,00015,00019,00060,000
Contribution margin14,00010,00016,00040,000
Delivery and ordering costs2,0003,0002,0007,000
Rent (per sq. foot used)3,0003,0002,0008,000
Allocated corporate costs5,0005,0005,00015,000
Corporate profit$4,000$(1,000)$7,000$10,000

a.  Do you recommend discontinuing the Other Candy product line? Why or why not?
b.  If the Chocolate product line had been discontinued, corporate profits for the current year would have decreased by what amount?
Title: The management accountant for the Chocolate S'more Company has prepared the following income ...
Post by: upturnedfurball on Mar 6, 2021
a.  No, I would not recommend discontinuing the Other Candy product line because this product line contributes $4,000 towards corporate costs and profits.
 $25,000 - $15,000 - $3,000 - $3,000 = $4,000
 Without the Other Candy product line, corporate profits would be $4,000 less than currently reported. 

b.  If the Chocolate product line were discontinued, corporate profits would immediately decrease by $9,000.
 $40,000 - $26,000 - $2,000 - $3,000 = $9,000
Title: Re: The management accountant for the Chocolate S'more Company has prepared the following income ...
Post by: rsgafhgadh on Jun 4, 2022
thank you!