Twinkie Trivia Co. manufactures and sells two trivia products, the Square Trivia

Question

Twinkie Trivia Co. manufactures and sells two trivia products, the Square Trivia Game and the Round Trivia Game. Last quarter’s operating profits, by product, and for the company as a whole, were as follows: Square Round Total Sales $14,400 $6,890 $21,290 Variable expenses 4,420 2,990 7,410 Contribution margin 9,980 3,900 13,880 Fixed expenses 2,980 4,200 7,180 Operating income $ 7,000 $(300 ) $ 6,700 Forty percent of the Round Game’s fixed costs could have been avoided if the game had not been produced or sold. If the Round Game had been discontinued before the last quarter, what would operating income have been for the company as a whole? Operating income without round $

Explanation / Answer

Fixed cost saved(4200*.40) 1680 Less Contribution Lost -3900 Decrease in Profit On account of Discontinue of operation -2220 Operating income of company as a whole =6700-2220 4480

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