Dexter Products, Inc., manufactures and sells a number of items, including an ov

Question

Dexter Products, Inc., manufactures and sells a number of items, including an overnight case.The company has been experiencing losses on the overnight case for some time, as shown on the following contribution format income statement:

     Discontinuing the overnight cases would not affect the company’s sales of its other product lines, its total general factory overhead, or its total purchasing department expenses.

Compute the increase or decrease of net operating income if the overnight case are continued or discontinued. (Leave no cells blank - be certain to enter "0" wherever required. Input all amounts as positive except Decreases in Sales, Decreases in Contribution Margin, and Net Losses which should be indicated by a minus sign.)

Dexter Products, Inc., manufactures and sells a number of items, including an overnight case.The company has been experiencing losses on the overnight case for some time, as shown on the following contribution format income statement:

Explanation / Answer

Keep Overnight Cases Drop Overnight Case Net Operating Income Sales 430000 0 -430000 Variable expenses:        Variable manufacturing expenses 138000 0 138000        Sales commissions 50000 0 50000        Shipping 23000 0 23000 Total variable expenses 211000 0 211000 Contribution margin 219000 0 -219000 Fixed expenses:        Salary of line manager 29000 0 29000        General factory overhead 112000 112000 0        Depreciation of equipment 35000 35000 0        Advertising—traceable 125000 0 125000        Insurance on inventories 11000 0 11000        Purchasing department 52000 52000 0 Total fixed expenses 364000 199000 165000 Net operating Income (loss) -145000 -199000 -54000

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