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Contemporary Trends sells paint and paint supplies carpet and wallpaper at a single store location in suburban Baltimore Although the company has been very profitable over the year management has seen very profitable over the year management has seen a significant decline in wallpaper sales and earnings Much of this decline is attributable to the internet and to companies that advertise deeply discounted prices in magazines and offer customer free shipping and toll free telephone number recent figures follow: Paint and supplies Carpeting wallpaper |Sales Less variable cost Fixed costs Total cost | operating income 190,000 114,000 28,000 142,000 48.000 230,000 161,000 37,500 198,500 31,500 70,000 56,000 22,000 78,000 -8,000 Management is studying whether to drop wallpaper because of the changing market and accompanying loss if the line is dropped the following changes are expected to occur a. The vacated space will be remodeled at a cost of 15,000 and will be devoted to an expanded line of high and carpet sales of carpet are expected to increase by 100,000 b. Contemporary can cut wallpapers fixed costs by 50% c. Sales of paint and paint supplies are expected to fall by 30% d. Considering (a), (b) and (c), explain your decision whether to drop or retain the wallpaper

Contemporary Trends sells paint and paint supplies carpet and wallpaper at a single store location in suburban Baltimore Although the company has been very profitable over the year management has seen very profitable over the year management has seen a significant decline in wallpaper sales and earnings Much of this decline is attributable to the internet and to companies that advertise deeply discounted prices in magazines and offer customer free shipping and toll free telephone number recent figures follow: Paint and supplies Carpeting wallpaper |Sales Less variable cost Fixed costs Total cost | operating income 190,000 114,000 28,000 142,000 48.000 230,000 161,000 37,500 198,500 31,500 70,000 56,000 22,000 78,000 -8,000 Management is studying whether to drop wallpaper because of the changing market and accompanying loss if the line is dropped the following changes are expected to occur a. The vacated space will be remodeled at a cost of 15,000 and will be devoted to an expanded line of high and carpet sales of carpet are expected to increase by 100,000 b. Contemporary can cut wallpapers fixed costs by 50% c. Sales of paint and paint supplies are expected to fall by 30% d. Considering (a), (b) and (c), explain your decision whether to drop or retain the wallpaper

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter6: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 3TIF
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Contemporary Trends sells paint and paint supplies carpet and wallpaper at a single store location in suburban Baltimore Although the company has been very profitable over the year management has seen very profitable over the year management has seen a significant decline in wallpaper sales and earnings Much of this decline is attributable to the internet and to companies that advertise deeply discounted prices in magazines and offer customer free shipping and toll free telephone number recent figures follow: Paint and supplies Carpeting wallpaper |Sales Less variable cost Fixed costs Total cost | operating income 190,000 114,000 28,000 142,000 48.000 230,000 161,000 37,500 198,500 31,500 70,000 56,000 22,000 78,000 -8,000 Management is studying whether to drop wallpaper because of the changing market and accompanying loss if the line is dropped the following changes are expected to occur a. The vacated space will be remodeled at a cost of 15,000 and will be devoted to an expanded line of high and carpet sales of carpet are expected to increase by 100,000 b. Contemporary can cut wallpapers fixed costs by 50% c. Sales of paint and paint supplies are expected to fall by 30% d. Considering (a), (b) and (c), explain your decision whether to drop or retain the wallpaper
Transcribed Image Text:Contemporary Trends sells paint and paint supplies carpet and wallpaper at a single store location in suburban Baltimore Although the company has been very profitable over the year management has seen very profitable over the year management has seen a significant decline in wallpaper sales and earnings Much of this decline is attributable to the internet and to companies that advertise deeply discounted prices in magazines and offer customer free shipping and toll free telephone number recent figures follow: Paint and supplies Carpeting wallpaper |Sales Less variable cost Fixed costs Total cost | operating income 190,000 114,000 28,000 142,000 48.000 230,000 161,000 37,500 198,500 31,500 70,000 56,000 22,000 78,000 -8,000 Management is studying whether to drop wallpaper because of the changing market and accompanying loss if the line is dropped the following changes are expected to occur a. The vacated space will be remodeled at a cost of 15,000 and will be devoted to an expanded line of high and carpet sales of carpet are expected to increase by 100,000 b. Contemporary can cut wallpapers fixed costs by 50% c. Sales of paint and paint supplies are expected to fall by 30% d. Considering (a), (b) and (c), explain your decision whether to drop or retain the wallpaper
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