On January 2, the management accountant for Giada's Book Store prepared the following projected income statement for the current year: Cookbook Travel Book Classics Total Sales $60,000 $100,000 $40,000 $200,000 Cost of goods sold 36,000 65,000 20,000 121,000 Contribution margin 24,000 35,000 20,000 79,000 Order and delivery processing 18,000 21,000 8,000 47,000 Rent (per sq. foot used) 2,000 1,000 3,000 6,000 Allocated corporate costs 7,000 7,000 7,000 21,000 Operating Income $ (3,000) $ 6,000 $ 2,000 $ 5,000 Assume that sales and costs are an accurate prediction for this year. If the Cookbook line is discontinued immediately, the space rented and used for cookbooks will be used by other book lines. If we drop the Cookbook line, overall firm operating income will decrease by:
On January 2, the
Cookbook Travel Book Classics Total
Sales $60,000 $100,000 $40,000 $200,000
Cost of goods sold 36,000 65,000 20,000 121,000
Contribution margin 24,000 35,000 20,000 79,000
Order and delivery processing 18,000 21,000 8,000 47,000
Rent (per sq. foot used) 2,000 1,000 3,000 6,000
Allocated corporate costs 7,000 7,000 7,000 21,000
Operating Income $ (3,000) $ 6,000 $ 2,000 $ 5,000
Assume that sales and costs are an accurate prediction for this year. If the Cookbook line is discontinued immediately, the space rented and used for cookbooks will be used by other book lines. If we drop the Cookbook line, overall firm operating income will decrease by:
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