Question 3 Lisah, Inc., manufactures golf clubs in three models. For the year, t

ID: 2478996 • Letter: Q

Question

Question 3 Lisah, Inc., manufactures golf clubs in three models. For the year, the Big Bart line has a net loss of $5,500 from sales $200,000, variable costs $176,000, and fixed costs $29,500. If the Big Bart line is eliminated, $20,100 of fixed costs will remain. Prepare an analysis showing whether the Big Bart line should be eliminated. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Continue Eliminate Net Income Increase (Decrease) Sales $ $ $ Variable costs Contribution margin Fixed costs Net Income / (Loss) $ $ $ The Big Bart product line should be .

Explanation / Answer

Particulars

Continue

Eliminate

Net Income Increase (Decrease)

Sales

$ 200,000

$ (200,000)

Variable costs

$ 176,000

$ (176,000)

Contribution margin

$ 24,000

$ (24,000)

Fixed costs

$ 29,500

$ 20,100

$ (9,400)

Net Income / (Loss)

$ (5,500)

$ (20,100)

$ (14,600)

By Eliminating Product line the Loss increases in other words net operating Income decreases

The Big Bart product line should be continued.