Desks Book Shelves Filing Cabinets
Sales $675,000 $1,125,000 $450,000
Variable Costs $202,500 $450,000 $247,500
Contribution Margin $472,500 $675,000 $202,500
Direct Fixed Costs $210,000 $270,000 $180,000
Allocated Fixed Costs. $135,000 $225,000 $90,000
Net Income (Loss) $127,500 $180,000 $(67,500) loss
Management is concerned about the continued losses shown by the Filing Cabinets and wants a recommendation as to whether or not the line should be discontinued. The special equipment used to produce Filing Cabinets has no resale value.
Prepare a differential cost schedule to indicate whether the company should keep or drop the Filing Cabinets product line
In a differential cost schedule we are interested in looking at what costs will not be there and what revenues will be eliminated.
In case the filing cabinets are eliminated, revenue ...
The solution explains how to prepare a differential cost schedule.