Greenview Dairies produces a line of organic yogurts for sale at supermarkets and specialty markets in the Southeast. Economicconditions and changing tastes have resulted in slowing demand growth. After recently expanding capacity, the company is nowoperating at 65 percent of the new capacity. The company is considering dropping one of the yogurt flavors, mixed berry, in hopes ofimproving profitability. If the mixed berry variety is dropped, the revenue associated with it will be lost and the related variable costssaved. The production manager estimates that the fixed costs will also be reduced by 30 percent.The following quarterly product line income statements (in thousands of dollars) are available:ProductSalesVariable costsContribution marginFixed costs allocated to each product lineOperating profit (loss)Vanilla$21,79014,700$7,0903,095$3,995Peach$33,84026,465$7,3754,655$2,720Mixed Berry$28,38025,490Complete this question by entering your answers in the tabs below.$2,8904,100$ (1,210)Required:a-1. Complete the following differential cost schedule.a-2. From an operating profit perspective, should Greenview Dairies drop the mixed berry line?b. One of the sales reps for Greenview heard about the possibility of dropping the mixed berry line and warned the marketingmanager that it was a mistake to consider the three products independently. Based on experience from stocking local grocery shelves,he knows that when customers stop seeing a particular flavor, they sometimes switch to a competitor, even for flavors Greenviewmight still sell. The financial staff sent a request to marketing asking for estimates of possible losses on the sales of other products.The marketing group responded that perhaps 5 percent of vanilla sales and 10 percent of peach sales would be lost if the mixed berryflavor is dropped.b-1. Complete the following differential cost schedule.b-2. Based on the estimate from the project manager, should Greenview Dairies drop the mixed berry line?

A differential cost schedule refers to a table which shows the curent profit (loss) with the…

Greenview Dairies produces a line of organic yogurts for sale at supermarkets and specialty markets in the Southeast. Economic conditions and changing tastes have resulted in slowing demand growth. After recently expanding capacity, the company is now operating at 65 percent of the new capacity. The company is considering dropping one of the yogurt flavors, mixed berry, in hopes of improving profitability. If the mixed berry variety is dropped, the revenue associated with it will be lost and the related variable costs saved. The production manager estimates that the fixed costs will also be reduced by 30 percent. The following quarterly product line income statements (in thousands of dollars) are available: Peach $33,840 26,465 Product Sales Variable costs Contribution margin Fixed costs allocated to each product line Operating profit (loss) Vanilla $21,790 14,700 $7,090 3,095 $3,995 $7,375 4,655 $2,720 Mixed Berry $28,380 25,490 $2,890 4,100 $ (1,210) Required: a-1. Complete the following differential cost schedule. a-2. From an operating profit perspective, should Greenview Dairies drop the mixed berry line? b. One of the sales reps for Greenview heard about the possibility of dropping the mixed berry line and warned the marketing manager that it was a mistake to consider the three products independently. Based on experience from stocking local grocery shelves, he knows that when customers stop seeing a particular flavor, they sometimes switch to a competitor, even for flavors Greenview might still sell. The financial staff sent a request to marketing asking for estimates of possible losses on the sales of other products. The marketing group responded that perhaps 5 percent of vanilla sales and 10 percent of peach sales would be lost if the mixed berry flavor is dropped. b-1. Complete the following differential cost schedule. b-2. Based on the estimate from the project manager, should Greenview Dairies drop the mixed berry line?

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q