Palaro Enterprises has a variety of product lines, all related to sports. The managers are not happy with expected results of the apparel line (below) and are considering dropping it. If they did so, the company could recover the investment in receivables and inventory related to the line and pay off debt of P320,000 that bears 14% interest.SalesP200,000Variable cost125,000Contribution marginP 75,000Avoidable fixed costs40,000Product marginP35,000Investment in receivables and inventoriesP320,000REQUIRED: Determine whether Palaro should drop the apparel line.

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Palaro Enterprises has a variety of product lines, all related to sports. The managers are not happy with expected results of the apparel line (below) and are considering dropping it. If they did so, the company could recover the investment in receivables and inventory related to the line and pay off debt of P320,000 that bears 14% interest.

Sales
P200,000

Variable cost
125,000

Contribution margin
P 75,000

Avoidable fixed costs
40,000

Product margin
P35,000




Investment in receivables and inventories
P320,000


REQUIRED: Determine whether Palaro should drop the apparel line.

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