Harmark has three product lines in its retail stores: kites, wind socks, and flags. Results of the fourth quarter are presented below: Kites Wind Socks Flags Total Units sold 1,000 2,000 2,000 5,000 Revenue $22,000 $40,000 $23,000 $85,000 Variable Departmental 15,000 22,000 12,000 49,000 Costs Direct fixed costs 1,000 3,000 2,000 6,000 Allocated fixed costs 8,000 8,000 8,000 28,000 Net income (loss) $(2,000) $7,000 $1,000 $6,000 The allocated fixed costs are unavoidable. Demand of individual products is not affected by changes in other product lines. Questions: What will happen to profits if Harmark discontinues the Kites product line? The profits will drop by _______.
Harmark has three product lines in its retail stores: kites, wind socks, and flags. Results of the fourth quarter are presented below:
Kites Wind Socks Flags Total
Units sold 1,000 2,000 2,000 5,000
Revenue $22,000 $40,000 $23,000 $85,000
Variable Departmental 15,000 22,000 12,000 49,000 Costs
Direct fixed costs 1,000 3,000 2,000 6,000
Allocated fixed costs 8,000 8,000 8,000 28,000
Net income (loss) $(2,000) $7,000 $1,000 $6,000
The allocated fixed costs are unavoidable. Demand of individual products is not affected by changes in other product lines.
Questions:
What will happen to profits if Harmark discontinues the Kites product line?
The profits will drop by _______.
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