Exercise 8-17 Ivanhoe Trivia Co. manufactures and sells two trivia products, the

Question

Exercise 8-17 Ivanhoe 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 $17,200 $6,950 $24,150 Sales revenue Variable expenses Contribution margin 12,560 4,020 16,580 Fixed expenses Operating income $ 9,770 $(180) 9,590 4,640 2,930 7,570 2,790 4,200 6,990 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

Unavoidable fixed costs for Round=(4200*0.6)=$2520

Hence operating income without round=9770-Unavoidable Fixed cost for Round

=(9770-2520)=$7250.

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