Keep-or-Drop Decision Charlevoix Company produces three products: Torch, Elk, and Walloon. A segmented income statement follows: Sales revenue Less: Variable expenses Contribution marnin Torch $1,280 1,115 €165 Elk (Shown in 000's) $185 45 Walloon 140 $360 288 th Total $1,825 1,448
Keep-or-Drop Decision Charlevoix Company produces three products: Torch, Elk, and Walloon. A segmented income statement follows: Sales revenue Less: Variable expenses Contribution marnin Torch $1,280 1,115 €165 Elk (Shown in 000's) $185 45 Walloon 140 $360 288 th Total $1,825 1,448
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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7.6
Transcribed Image Text:Keep-or-Drop Decision
Charlevoix Company produces three products: Torch, Elk, and Walloon. A segmented income statement follows:
Sales revenue
Less: Variable expenses
Contribution margin
Less direct fixed expenses:
Depreciation.
Advertising
Torch
$1,280
1,115
$165
Required:
50
95
Elk
(Shown in 000's)
$185
45
$140
15
Walloon
85
$360
288
$72
9
276
Segment margin
$20 $40
$27
Direct fixed expenses consist of depreciation and advertising. All depreciation on the equipment is dedicated to the product lines. None of the
equipment can be sold.
Total
196
$(33)
$1,825
1,448
$377
74
Assume that each of the three products has a different marketing campaign whose advertising would be eliminated if the associated product
were dropped.
1. Conceptual Connection: Estimate the impact on profit that would result from dropping Walloon. Enter amount in full, rather than in
thoueande Enr avamale "15000" rather than "1"
![Less direct fixed expenses:
Depreciation
Advertising
50
95
Required:
15
85
9
96
74
Segment margin
$20
$40
$(33)
$27
Direct fixed expenses consist of depreciation and advertising. All depreciation on the equipment is dedicated to the product lines. None of the
equipment can be sold.
276
Assume that each of the three products has a different marketing campaign whose advertising would be eliminated if the associated product
were dropped.
2. Conceptual Connection: Should Charlevoix keep or drop Walloon?
Drop
1. Conceptual Connection: Estimate the impact on profit that would result from dropping Walloon. Enter amount in full, rather than in
thousands. For example, "15000" rather than "15".
Increase
3. Conceptual Connection: Charlevoix's CFO decided to conduct an empirical study of previous years' advertising cost data to better understand
the factors that have caused this important expense to vary from year to year. Briefly explain the data analytic type represented by the CFO's
study of advertising cost. [Refer to Exhibit 2.2]
The empirical study of past advertising cost represents an example of a diagnostic
✓data analytic.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F93a94bf3-1a0f-4d9c-8504-f82e4eab0fc0%2Fa03e8045-04a2-4ea8-ae35-71f0e029ad78%2F4lbnlqu_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Less direct fixed expenses:
Depreciation
Advertising
50
95
Required:
15
85
9
96
74
Segment margin
$20
$40
$(33)
$27
Direct fixed expenses consist of depreciation and advertising. All depreciation on the equipment is dedicated to the product lines. None of the
equipment can be sold.
276
Assume that each of the three products has a different marketing campaign whose advertising would be eliminated if the associated product
were dropped.
2. Conceptual Connection: Should Charlevoix keep or drop Walloon?
Drop
1. Conceptual Connection: Estimate the impact on profit that would result from dropping Walloon. Enter amount in full, rather than in
thousands. For example, "15000" rather than "15".
Increase
3. Conceptual Connection: Charlevoix's CFO decided to conduct an empirical study of previous years' advertising cost data to better understand
the factors that have caused this important expense to vary from year to year. Briefly explain the data analytic type represented by the CFO's
study of advertising cost. [Refer to Exhibit 2.2]
The empirical study of past advertising cost represents an example of a diagnostic
✓data analytic.
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