Vulcan Swimsuit Company is considering dropping its line of women's beach robes. A recent product income statement for the robe line follows:
Cost of goods sold 861,840
Gross margin 88,920
Selling and administrative expenses 136,800
Net loss $(47,880)
Factory overhead accounts for 35 percent of the cost of the goods sold and is one third fixed. These data are believed to reflect conditions in the immediate future.
Should the line be dropped?© BrainMass Inc. brainmass.com October 9, 2019, 8:20 pm ad1c9bdddf
Please see the response to your positing as below:
Calculation of Factory overheads:
Factory overhead = cost of goods sold*35% =861840*35% =301644
Fixed elements in factory ...
Solution contains computations of increase or decrease in overall operating income if the line is discontinued .