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    Product Income Statement

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    Vulcan Swimsuit Company is considering dropping its line of women's beach robes. A recent product income statement for the robe line follows:

    Revenue $950,760
    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?

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    Solution Preview

    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 Summary

    Solution contains computations of increase or decrease in overall operating income if the line is discontinued .