Blowing Sand Company produces the Drafty model fan, which currently has a net loss of $36,000 as follows: Drafty Model $300,000 210,000 $ 90,000 84,000 $ 6,000 42,000 $(36,000) Sales revenue Less: Variable costs i Contribution margin Less: Direct fixed costs Segment margin Less: Common fixed costs Net operating income (loss) Eliminating the Drafty product line would eliminate $84,000 of direct fixed costs. The $42,000 of common fixed costs would be redistributed to Blowing Sand's remaining product lines. Will Blowing Sand's net operating income increase or decrease if the Drafty model is eliminated? By how much? Total Profit

Blowing Sand Company produces the Drafty model fan, which currently has a net loss of $36,000 as follows: Drafty Model $300,000 210,000 $ 90,000 84,000 $ 6,000 42,000 $(36,000) Sales revenue Less: Variable costs i Contribution margin Less: Direct fixed costs Segment margin Less: Common fixed costs Net operating income (loss) Eliminating the Drafty product line would eliminate $84,000 of direct fixed costs. The $42,000 of common fixed costs would be redistributed to Blowing Sand's remaining product lines. Will Blowing Sand's net operating income increase or decrease if the Drafty model is eliminated? By how much? Total Profit

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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