Ch. 7 Incremental Analysis pg 467 Segment Income Statement Please provide the answer and explain the answer to the following question with the information given below. "Big Tent Company is trying to decide whether to keep or drop one of its outdoor wedding tents. The company's segmented income statement shows that this product is generating a net loss as follows:" Sales Revenue: $100,000 Less: Variable Costs $70,000 Contribution Margin $30,000 Less: Direct Fixed Costs $10,000 Segment Margin $20,000 Less: Allocated common fixed costs $30,000 Net Operating Income $(10,000) The company estimates that eliminating this product line will increase the contribution margin on a related product line by $25,000. Based on this information, what impact would dropping the line have on the company's overall profitability?
Ch. 7 Incremental Analysis pg 467 Segment Income Statement
Please provide the answer and explain the answer to the following question with the information given below.
"Big Tent Company is trying to decide whether to keep or drop one of its outdoor wedding tents. The company's segmented income statement shows that this product is generating a net loss as follows:"
Sales Revenue: $100,000
Less: Variable Costs $70,000
Contribution Margin $30,000
Less: Direct Fixed Costs $10,000
Segment Margin $20,000
Less: Allocated common fixed costs $30,000
Net Operating Income $(10,000)
The company estimates that eliminating this product line will increase the contribution margin on a related product line by $25,000. Based on this information, what impact would dropping the line have on the company's overall profitability?
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