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.
Required:
Should the line be dropped?
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Solution Summary
Solution contains computations of increase or decrease in overall operating income if the line is discontinued .
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 ...
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