M7-7 Analyzing Keep-or-Drop Decision [LO 7-2, 7-5] Blowing Sand Company produces the Drafty model fan, which currently has a net loss of $45,000 as follows: Drafty Model $170,000 119,000 $ 51,000 42,000 $ 9,000 54,000 $ (45,000) Sales revenue Less: Variable costs Contribution margin Less: Direct fixed costs Segment margin Less: Common fixed costs Net operating income (loss) Eliminating the Drafty product line would eliminate $42,000 of direct fixed costs. The $54,000 of common fixed costs would be redistributed to Blowing Sand's remaining product lines. Will Blowing Sand's net operating income increase or decrease if the Drafty model is eliminated? By how much? Total Profit Decreases by
M7-7 Analyzing Keep-or-Drop Decision [LO 7-2, 7-5] Blowing Sand Company produces the Drafty model fan, which currently has a net loss of $45,000 as follows: Drafty Model $170,000 119,000 $ 51,000 42,000 $ 9,000 54,000 $ (45,000) Sales revenue Less: Variable costs Contribution margin Less: Direct fixed costs Segment margin Less: Common fixed costs Net operating income (loss) Eliminating the Drafty product line would eliminate $42,000 of direct fixed costs. The $54,000 of common fixed costs would be redistributed to Blowing Sand's remaining product lines. Will Blowing Sand's net operating income increase or decrease if the Drafty model is eliminated? By how much? Total Profit Decreases by
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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how would I find the difference between net operating income if the project is eliminated?
![M7-7 Analyzing Keep-or-Drop Decision [LO 7-2, 7-5]
Blowing Sand Company produces the Drafty model fan, which currently has a net loss of $45,000 as follows:
Drafty Model
$170,000
119,000
$ 51,000
42,000
$ 9,000
54,000
$ (45,000)
Sales revenue
Less: Variable costs
Contribution margin
Less: Direct fixed costs
Segment margin
Less: Common fixed costs
Net operating income (loss)
Eliminating the Drafty product line would eliminate $42,000 of direct fixed costs. The $54,000 of common fixed costs would be redistributed to Blowing Sand's remaining product
lines.
Will Blowing Sand's net operating income increase or decrease if the Drafty model is eliminated? By how much?
Total Profit
Decreases
by](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc538f540-c09d-453f-b85d-1302807e9c91%2F725d3bbc-9fb7-4f51-93a8-9ddfbc77514e%2Fnf6dk9.png&w=3840&q=75)
Transcribed Image Text:M7-7 Analyzing Keep-or-Drop Decision [LO 7-2, 7-5]
Blowing Sand Company produces the Drafty model fan, which currently has a net loss of $45,000 as follows:
Drafty Model
$170,000
119,000
$ 51,000
42,000
$ 9,000
54,000
$ (45,000)
Sales revenue
Less: Variable costs
Contribution margin
Less: Direct fixed costs
Segment margin
Less: Common fixed costs
Net operating income (loss)
Eliminating the Drafty product line would eliminate $42,000 of direct fixed costs. The $54,000 of common fixed costs would be redistributed to Blowing Sand's remaining product
lines.
Will Blowing Sand's net operating income increase or decrease if the Drafty model is eliminated? By how much?
Total Profit
Decreases
by
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