A can manufacturing company produces and sells three different types of cans: Versions X, Y, and Z. Corporate overhead (rent, general and administrative expense, etc.) is allocated equally among the three product versions. A high-level, simplified profit/loss statement for the company is provided. Total $525,000 $322,500 $180,000 $22,500 Net Can Sales Variable Costs Corporate Overhead Contribution to Profit Version X $180,000 $105,000 $60,000 $15,000 Version Y $240,000 $135,000 $60,000 $45,000 Version Z $105,000 $82,500 $60,000 -$37,500 After reviewing the statement, company managers are concerned about the loss on Version Z and are considering ceasing production of that version. Should they immediately discontinue Version Z? Why or why not?
A can manufacturing company produces and sells three different types of cans: Versions X, Y, and Z. Corporate overhead (rent, general and administrative expense, etc.) is allocated equally among the three product versions. A high-level, simplified profit/loss statement for the company is provided. Total $525,000 $322,500 $180,000 $22,500 Net Can Sales Variable Costs Corporate Overhead Contribution to Profit Version X $180,000 $105,000 $60,000 $15,000 Version Y $240,000 $135,000 $60,000 $45,000 Version Z $105,000 $82,500 $60,000 -$37,500 After reviewing the statement, company managers are concerned about the loss on Version Z and are considering ceasing production of that version. Should they immediately discontinue Version Z? Why or why not?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
![A can manufacturing company produces and sells three different types of cans: Versions X, Y, and Z.
Corporate overhead (rent, general and administrative expense, etc.) is allocated equally among the three
product versions. A high-level, simplified profit/loss statement for the company is provided.
Total
$525,000
$322,500
$180,000
$22,500
Net Can Sales
Variable Costs
Corporate Overhead
Contribution to Profit
Version X
$180,000
$105,000
$60,000
$15,000
Version Y
$240,000
$135,000
$60,000
$45,000
Version Z
$105,000
$82,500
$60,000
-$37,500
After reviewing the statement, company managers are concerned about the loss on Version Z and are
considering ceasing production of that version. Should they immediately discontinue Version Z? Why
or why not?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc91ca9bc-f1a4-4ccd-9d92-ad4a596a80e8%2F1895b558-69d2-4b1f-acf5-fd9379521cdc%2Ffm4nea_processed.png&w=3840&q=75)
Transcribed Image Text:A can manufacturing company produces and sells three different types of cans: Versions X, Y, and Z.
Corporate overhead (rent, general and administrative expense, etc.) is allocated equally among the three
product versions. A high-level, simplified profit/loss statement for the company is provided.
Total
$525,000
$322,500
$180,000
$22,500
Net Can Sales
Variable Costs
Corporate Overhead
Contribution to Profit
Version X
$180,000
$105,000
$60,000
$15,000
Version Y
$240,000
$135,000
$60,000
$45,000
Version Z
$105,000
$82,500
$60,000
-$37,500
After reviewing the statement, company managers are concerned about the loss on Version Z and are
considering ceasing production of that version. Should they immediately discontinue Version Z? Why
or why not?
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