f the toy were discontinued, Draper could avoid $8,000 per year in fixed costs. The remainder of the fixed costs are not avoidable. Suppose that if the Doombug toy is dropped, the production and sale of other Draper toys would increase so as to generate a $16,000 increase in the contribution margin received from these other toys. If all other conditions are the same, the financial advantage (disadvantage) from discontinuing the production and sale of Doombugs would be:
f the toy were discontinued, Draper could avoid $8,000 per year in fixed costs. The remainder of the fixed costs are not avoidable. Suppose that if the Doombug toy is dropped, the production and sale of other Draper toys would increase so as to generate a $16,000 increase in the contribution margin received from these other toys. If all other conditions are the same, the financial advantage (disadvantage) from discontinuing the production and sale of Doombugs would be:
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Subject: accounting
Transcribed Image Text:The Draper Corporation is considering dropping its Doombug toy due to continuing losses. Data on the toy for the past year follow:
Sales of 15,000 units
Variable expenses
Contribution margin
$ 150,000
120,000
30,000
40,000
$ (10,000)
Fixed expenses
Net operating loss
If the toy were discontinued, Draper could avoid $8,000 per year in fixed costs. The remainder of the fixed costs are not avoidable.
Suppose that if the Doombug toy is dropped, the production and sale of other Draper toys would increase so as to generate a
$16,000 increase in the contribution margin received from these other toys. If all other conditions are the same, the financial
advantage (disadvantage) from discontinuing the production and sale of Doombugs would be:
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