Macaron Carpets produces and sells three lines of carpet: economy, standard, and

Question

Macaron Carpets produces and sells three lines of carpet: economy, standard, and deluxe. Jeff Choi, the chief financial officer of the company, has prepared the following report on the profitability in the past year. In the report, fixed costs are allocated based on yards of carpet.

Economy       Standard       Deluxe       Total
Yards of carpet
30,400       45,600       76,000       152,000
Sales
$319,000       $698,000       $1,497,100       $2,514,100
Less variable costs (dye, yarn, labor, etc.)       176,300       429,900       923,500       1,529,700
Less fixed costs (depreciation, supervisory salaries, etc.)       159,160       238,740       397,900       795,800
Profit (loss)       $(16,460)       $29,360       $175,700       $188,600

Upon seeing the report, Matt Williams, the president of Macaron Carpets, suggested that the company should consider dropping the economy grade and concentrate on the two other lines. Jeff replied, however, that would lead to the cost allocation death spiral.

  
Revise the report assuming the company drops the economy grade. (Enter loss using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Standard       Deluxe       Total
Yards of carpet

Sales
$
$
$
Less variable costs      

Less fixed costs      

Profit (loss)       $
$
$

Explanation / Answer

Revise the report assuming the company drops the economy grade Particulars Standard Deluxe Total Sales (yards)           45,600 76000     121,600 Sales ($)          698,000 1497100 2,195,100 Less: variable cost ($)          429,900 923500 1,353,400 Less: Fixed cost($) 298,425 497,375     795,800 Profit($)          (30,325) 76,225       45,900

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