Homework Week 5 Homework graded Score 0 of 7 pts HWScore 413

Homework: Week 5 Homework (graded) Score: 0 of 7 pts HWScore: 4135%, 2068 of 50 pts Gross prof Less Operating expenses S (450.000)

Solution

Contributiong margin statement

sales revenue = 7600000

less: variable cost [(60% * 6500000)+(70%*1550000)] = 4985000

Contribution margin = 2615000

less: fixed cost [(40% * 6500000)+(30%*1550000)] = 3065000

Operating income (Loss) = ($450000)

If product line is discontinued :

   Contributiong margin statement

sales revenue = 0

less: variable cost = 0

Contribution margin = 0

less: fixed cost [3065000 -775000] = 2290000

Operating income (Loss) = ($2290000)

No, Tasty tart should not discontinue the product line, because after discontinuing its loss ($2290000) would be greater than the running product line loss ($45000)