---**Question (b): Impact of Dropping Product A on Income**- **Prompt:** What would be the effect on income if product A were dropped?- **Input Field:** - Response Format: "Net income would [dropdown selection] by $ [input box]."**Additional Resources:**- **eTextbook and Media**--- Cullumber Toys’ management is considering eliminating product A, which has been showing a loss for several years. The company's annual income statement is as follows:| | A | B | C | Total ||--------------|------------|------------|------------|-------------|| **Sales** | $2,247,000 | $1,404,000 | $1,809,300 | $5,460,300 || **Variable expenses** | 1,632,000 | 600,400 | 1,095,200 | 3,327,600 || **Contribution margin** | 615,000 | 803,600 | 714,100 | 2,132,700 || **Advertising expense** | 517,000 | 430,000 | 520,000 | 1,467,000 || **Depreciation expense** | 15,900 | 10,000 | 20,600 | 46,500 || **Corporate expenses** | 93,900 | 81,600 | 105,000 | 280,500 || **Total fixed expenses** | 626,800 | 521,600 | 645,600 | 1,794,000 || **Operating income** | (11,800) | 282,000 | 68,500 | 338,700 |### Notes:- **Advertising expense**: Specific to each product.- **Depreciation expense**: Specific to each product; no other use available, no resale value.- **Corporate expenses**: Allocated based on number of employees.

Differential analysis is a management accounting technique in which we assess only the changes in…

Answered: (b) What would be the effect on income…

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(b) What would be the effect on income if product A were dropped? Net income would by $

FINANCIAL ACCOUNTING

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ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Question

Cullumber Toys’ management is considering eliminating product A, which has been showing a loss for several years. The company's annual income statement is as follows:

| | A | B | C | Total |
|--------------|------------|------------|------------|-------------|
| **Sales** | $2,247,000 | $1,404,000 | $1,809,300 | $5,460,300 |
| **Variable expenses** | 1,632,000 | 600,400 | 1,095,200 | 3,327,600 |
| **Contribution margin** | 615,000 | 803,600 | 714,100 | 2,132,700 |
| **Advertising expense** | 517,000 | 430,000 | 520,000 | 1,467,000 |
| **Depreciation expense** | 15,900 | 10,000 | 20,600 | 46,500 |
| **Corporate expenses** | 93,900 | 81,600 | 105,000 | 280,500 |
| **Total fixed expenses** | 626,800 | 521,600 | 645,600 | 1,794,000 |
| **Operating income** | (11,800) | 282,000 | 68,500 | 338,700 |

### Notes:
- **Advertising expense**: Specific to each product.
- **Depreciation expense**: Specific to each product; no other use available, no resale value.
- **Corporate expenses**: Allocated based on number of employees.

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