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Mercer has three product lines in its retail stores

4. Mercer has three product lines in its retail stores: books, videos, and music. Results of the fourth quarter are presented below:
Books Music Videos Total
Units sold 1,000 2,000 2,000 5,000
Revenue $22,000 $40,000 $23,000 $85,000
Variable departmental costs 17,000 22,000 12,000 51,000
Direct fixed costs 1,000 3,000 2,000 6,000
Allocated fixed costs 7,000 7,000 7,000 21,000
Net income (loss) $ (3,000) $ 8,000 $ 2,000 $ 7,000

The allocated fixed costs are unavoidable. Demand of individual products are not affected by changes in other product lines.

Instructions
Should Mercer eliminate the Books product line? (10 points)

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4. Mercer has three product lines in its retail stores: books, videos, and music. Results of the fourth quarter are presented below:
Books Music Videos Total
Units sold 1,000 2,000 2,000 5,000
Revenue $22,000 $40,000 $23,000 $85,000
Variable departmental ...

Solution Summary

This solution is comprised of a detailed explanation to answer whether Mercer should eliminate the Books product line.

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