Q Accounting 2033-005-MD C7 061 points MSI s considering elminating a product fr
ID: 2437856 • Letter: Q
Question
Q Accounting 2033-005-MD C7 061 points MSI s considering elminating a product from its Toddie Town Tours colflection This collection is aimed at childen one to three years of age and inoudes hourn" roach Pet Sore Pande a d The Oce y Getaway rave moessi O-lowever, salesforend Cho colect n. The Post Orce Poka, Nae ugged-esse other COs are planned for this collection, but none is eady for production of a hypothetical town Two MSirs information nelated to the Toddle Town Tours collection olows Income Stawment o O700 Net opersting on total sales dollars MSi has determined that elimination off the Post Office Polka (POP) program would not impact sales ofl the other two ens The emaining fxnd overhod ounently alocaried to the POP product would be red strbuted to the emaining two products 1, Caloulate the incremental ofect on proflt the POP product is elimnaled 4 W EExplanation / Answer
Answer:
1
Effect on profit
Contribution lost on POP program
-4000
less: Savings in direct fixed cost
3200
Net loss
-800
Effect on profit
Decrease By
800
______________________________________________
2
Answer: NO
Explanation:
POP program should not be eliminated because eliminating this program will further increase the loss
____________________________________________
3
Contribution lost on POP program
-4000
less: Savings in direct fixed cost
3200
Savings in common fixed costs
1200
increase in net profit
400
Effect on profit
Increase By
400
3-b : yes
POP program should be eliminated
Contribution lost on POP program
-4000
less: Savings in direct fixed cost
3200
Net loss
-800
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