PROBLEM: WORKSHEET: Samstrun Electronics Store has three major departments: comp

Question

PROBLEM:

WORKSHEET:

Samstrun Electronics Store has three major departments: computers, televisions, and appliances. been a consistent money loser, as typified by the following recent monthly operating report: The appliance department has Total Computers TVs Appliances Sales Variable expenses Contribution margin Fixed expenses Income (loss) $2,550,000 2,100,000 $450,000 305,000 $145,000 $750,000 600,000 $150,000 100,000 $1,200,000 1000,000 $200,000 80,000 $120,000 $600,000 500,000 $100,000 125,000 $(25,000) Management is considering a strategy to exit the appliance business. If this strategy is followed, the floor space currently dedicated to appliances will be used to expand the television showroom space. It is believed that television sales will increase by 40% Fixed expenses that can be eliminated by abandoning appliance sales include the salary of a service tech and the lease of a delivery van. The two components total $10,000 per month. The remaining fixed costs relate to facilities expenses and employees that will be diverted to television sales activities Evaluate the impact on total profitability of exiting the appliance sales market. How can overall profits be negatively impacted by abandoning an "unprofitable" product line?

Explanation / Answer

total computers TVs sales 2430000 750000 1680000 variable expenses 2000000 600000 1400000 contribution 430000 150000 280000 fixed expenses 295000 100000 195000 income 135000 50000 85000 Decision: not to exit the appliance business Current profit total 145000 post exit profit 135000 loss -10000

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.