Your Retail Store's accountant prepared the following income statement for the ladies' accessories product line:SalesLess: Variable expensesContribution marginLess: Fixed expenses:WagesInsurance on inventoryAdvertising$2,975,0001,398, 2501,576,750$1,871,00059,500654, 5001,785,000Net operating income (loss)$ (208,250)Management is concerned about the loss and is considering dropping the product line. If the product line is dropped, a job has to b-created elsewhere for a long-term employee currently earning an annual salary of $89,250.Requlred:Calculate the increase or decrease in the operating income in both alternatives.Keep Accesories Product LineDrop Accesories Product LineSalesFixed expensesNet operating income (loss)Should the ladies' accessories product line be dropped?

Incremental Analysis: Incremental analysis refers to the analysis of differential revenue that could…

Answered: Requlred: Calculate the increase or…

Business

Accounting

Requlred: Calculate the increase or decrease in the operating income in both alternatives.

Century 21 Accounting General Journal

11th Edition

ISBN:9781337680059

Author:Gilbertson

Publisher:Gilbertson

Chapter20: Accounting For Inventory

Section: Chapter Questions

Problem 1ANFS

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Concept explainers

Manufacturing Costs

Manufacturing cost is the total cost of procuring or producing a product. In other words, the manufacturing cost is the cost that an individual or business owner undertakes for the manufacturing of goods.

Question

Your Retail Store's accountant prepared the following income statement for the ladies' accessories product line:
Sales
Less: Variable expenses
Contribution margin
Less: Fixed expenses:
Wages
Insurance on inventory
Advertising
$2,975,000
1,398, 250
1,576,750
$1,871,000
59,500
654, 500
1,785,000
Net operating income (loss)
$ (208,250)
Management is concerned about the loss and is considering dropping the product line. If the product line is dropped, a job has to b-
created elsewhere for a long-term employee currently earning an annual salary of $89,250.
Requlred:
Calculate the increase or decrease in the operating income in both alternatives.
Keep Accesories Product Line
Drop Accesories Product Line
Sales
Fixed expenses
Net operating income (loss)
Should the ladies' accessories product line be dropped?

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