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< Keep-or-Drop Decision Charlevoix Company produces three products: Torch, Elk, and Walloon. A segmented income statement, with amounts given in thousands, follows: Torch Elk Walloon Total Sales revenue $1,280 $185 $315 $1,780 Less: Variable expenses 1,115 45 221 1,381 Contribution margin $165 $140 $94 $399 Less direct fixed expenses: Depreciation 50 15 10 75 Advertising 95 85 120 300 Segment margin $20 $40 $(36) $24 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. Assume that, each of the three products has a different marketing campaign whose advertising would be eliminated if the associated product were dropped. Assume that 30% of the Torch customers choose to buy from Charlevoix because it offers a full range of products, including Walloon. If Walloon were no longer available from Charlevoix, these customers would go elsewhere to purchase Torch. Required: 1. Conceptual Connection: Estimate the impact on profit that would result from dropping Wallon. Enter amount in full, rather than in thousands. For example, "15000" rather than "15". Decrease 37,500 X こ

< Keep-or-Drop Decision Charlevoix Company produces three products: Torch, Elk, and Walloon. A segmented income statement, with amounts given in thousands, follows: Torch Elk Walloon Total Sales revenue $1,280 $185 $315 $1,780 Less: Variable expenses 1,115 45 221 1,381 Contribution margin $165 $140 $94 $399 Less direct fixed expenses: Depreciation 50 15 10 75 Advertising 95 85 120 300 Segment margin $20 $40 $(36) $24 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. Assume that, each of the three products has a different marketing campaign whose advertising would be eliminated if the associated product were dropped. Assume that 30% of the Torch customers choose to buy from Charlevoix because it offers a full range of products, including Walloon. If Walloon were no longer available from Charlevoix, these customers would go elsewhere to purchase Torch. Required: 1. Conceptual Connection: Estimate the impact on profit that would result from dropping Wallon. Enter amount in full, rather than in thousands. For example, "15000" rather than "15". Decrease 37,500 X こ

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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< Keep-or-Drop Decision Charlevoix Company produces three products: Torch, Elk, and Walloon. A segmented income statement, with amounts given in thousands, follows: Torch Elk Walloon Total Sales revenue $1,280 $185 $315 $1,780 Less: Variable expenses 1,115 45 221 1,381 Contribution margin $165 $140 $94 $399 Less direct fixed expenses: Depreciation 50 15 10 75 Advertising 95 85 120 300 Segment margin $20 $40 $(36) $24 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. Assume that, each of the three products has a different marketing campaign whose advertising would be eliminated if the associated product were dropped. Assume that 30% of the Torch customers choose to buy from Charlevoix because it offers a full range of products, including Walloon. If Walloon were no longer available from Charlevoix, these customers would go elsewhere to purchase Torch. Required: 1. Conceptual Connection: Estimate the impact on profit that would result from dropping Wallon. Enter amount in full, rather than in thousands. For example, "15000" rather than "15". Decrease 37,500 X こ
Transcribed Image Text:< Keep-or-Drop Decision Charlevoix Company produces three products: Torch, Elk, and Walloon. A segmented income statement, with amounts given in thousands, follows: Torch Elk Walloon Total Sales revenue $1,280 $185 $315 $1,780 Less: Variable expenses 1,115 45 221 1,381 Contribution margin $165 $140 $94 $399 Less direct fixed expenses: Depreciation 50 15 10 75 Advertising 95 85 120 300 Segment margin $20 $40 $(36) $24 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. Assume that, each of the three products has a different marketing campaign whose advertising would be eliminated if the associated product were dropped. Assume that 30% of the Torch customers choose to buy from Charlevoix because it offers a full range of products, including Walloon. If Walloon were no longer available from Charlevoix, these customers would go elsewhere to purchase Torch. Required: 1. Conceptual Connection: Estimate the impact on profit that would result from dropping Wallon. Enter amount in full, rather than in thousands. For example, "15000" rather than "15". Decrease 37,500 X こ
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