if the image is blurry: https://i.imgur.com/ybMi3Ie.png E8-22A (similar to) uest

Question

if the image is blurry: https://i.imgur.com/ybMi3Ie.png

E8-22A (similar to) uestion Helo Suppoe Grainy Day is considering cizcontinuing its fruity rings procuct in. Aszume that during the paztyear, hefruity ring: product ine income statema showed the fellowwing: EEf Click the icon to view the income statement dala.) Fixed manufactur ng overhood cos "ccou or 4 % o the cost cf goods hi c on , 30% ofthe o crat ng c e ses are foco S ce the Tuty nngz nc : cn , one o the company's ceros operations on 5700.000 dro ct ed costs thc ma on r of hich adverteng wil be címh2bcd t: produc in d?continu d T Begn by preparing ? contrbution morgn income statement ior the tuky nngs' product line. Usc ? mnus sign or parentheses bo cntera loss.) Les: Vriable expenses Contribution main Operating income floss) Dals Tatile Sales revenu Lesz Cost of goods zold Gmas prof 5 7,600,000 6,150,000 1.450,000 1550 000 100 000) Operating income (loss Print Done

Explanation / Answer

Computation of total variable cost and fixed cost: Variable Fixed Cost of Goods sold 3690000 2460000 Operating expense 1085000 465000 Total 4775000 2925000 Contribution margin income statement: Sales 7600000 Less: Variable cost 4775000 Contribution margin earned 2825000 Less: fixed cost 2925000 Net income -100000 Net financial advantage /Disadvantage of discontinuance: Loss of sales revenue -7600000 Less: Savings in cost Savings n variable cost 4775000 Savings in direct fixed cost 780000 Net increase in loss -2045000 Operating Loss of company after discontinuance: ($2145000) Hence, Company shall not discontinued operations.

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