Abel Company produces three versions of baseball bats: wood, aluminum, and hard

Question

Abel Company produces three versions of baseball bats: wood, aluminum, and hard rubber. A segmented income statement for a recent period follows: Wood Aluminum Hard Rubber Total Sales $500,000 $200,000 $65,000 $765,000 Variable expenses 325,000 140,000 58,000 523,000 Contribution margin 175,000 60,000 7,000 242,000 Fixed expenses 75,000 35,000 22,000 132,000 Net income (loss) $100,000 $ 25,000 $(15,000) $110,000 Assume none of the fixed expenses for the hard rubber line are avoidable. What will total net income be for Abel if the line is dropped?

Explanation / Answer

Solution:

Total income of Abel before dropping hard rubber line = $110,000

If hard rubber line will be dropped, then none of fixed cost is avoidable, therefore it will result in loss of contribution margin of $7,000

Therefore

Total income of abel after dropping the hard rubber line = $110,000 - $7,000 = $103,000

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

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