Parino Company has three product lines in its retail stores: books, videos, and music. The allocated fixed costs are based on units sold and are unavoidable. Demand of individual products is not affected by changes in other product lines. Results of the fourth quarter are presented below: Books Music Videos Total Units sold 1,000 2,000 2,000 5,000 Revenue $24,000 $48,000 $30,000 $102,000 Variable departmental costs 15,000 22,000 23,000 60,000 Direct fixed costs 3,000 6,000 4,000 13,000 Allocated fixed costs 4,400 8,800 8,800 22,000 ===== ==== = ====== ====== Net income (loss) $ 1,600 $11,200 $ (5,800) $ 7,000 Instructions Prepare an incremental analysis of the effect of dropping the Video product line.
Parino Company has three product lines in its retail stores: books, videos, and music. The allocated fixed costs are based on units sold and are unavoidable. Demand of individual products is not affected by changes in other product lines. Results of the fourth quarter are presented below: Books Music Videos Total Units sold 1,000 2,000 2,000 5,000 Revenue $24,000 $48,000 $30,000 $102,000 Variable departmental costs 15,000 22,000 23,000 60,000 Direct fixed costs 3,000 6,000 4,000 13,000 Allocated fixed costs 4,400 8,800 8,800 22,000 ===== ==== = ====== ====== Net income (loss) $ 1,600 $11,200 $ (5,800) $ 7,000 Instructions Prepare an incremental analysis of the effect of dropping the Video product line.
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