The following information is available for Titan Based on this information, the management is considering eliminating product line C. They assumed that by operating only product lines A and B, they would have higher profits. It was also determined that if product line C is discontinued, 80% of the fixed overhead can be avoided, and 70% of the fixed selling and administrative expenses can also be avoided. Product A Product B Product C Sales P100,000 P300,000 P200,000 Cost of Goods Sold Direct Materials 25,000 75,000 80,000 Labor 20,000 40,000 50,000 Variable Overhead 10,000 20,000 15,000 Fixed Overhead 5,000 15,000 35,000 Total 60,000 150,000 180,000 Gross Profit 40,000 150,000 20,000 Selling and Administrative Variable 12,000 30,000 10,000 Product A Product B Product C Fixed 8,000 40,000 30,000 Total 20,000 70,000 40,000 Net Income (Loss) P20,000 80,000 (20,000) Based on the above data, should product line C be continued or eliminated? Justify your answer.
- The following information is available for Titan Based on this information, the management is considering eliminating product line C. They assumed that by operating only product lines A and B, they would have higher profits. It was also determined that if product line C is discontinued, 80% of the fixed
overhead can be avoided, and 70% of the fixed selling and administrative expenses can also be avoided.
|
|
Product A |
Product B |
Product C |
|
Sales |
P100,000 |
P300,000 |
P200,000 |
|
Cost of Goods Sold |
|
|
|
|
Direct Materials |
25,000 |
75,000 |
80,000 |
|
Labor |
20,000 |
40,000 |
50,000 |
|
Variable Overhead |
10,000 |
20,000 |
15,000 |
|
Fixed Overhead |
5,000 |
15,000 |
35,000 |
|
Total |
60,000 |
150,000 |
180,000 |
|
Gross Profit |
40,000 |
150,000 |
20,000 |
|
Selling and Administrative |
|
|
|
|
Variable |
12,000 |
30,000 |
10,000 |
|
|
Product A |
Product B |
Product C |
|
Fixed |
8,000 |
40,000 |
30,000 |
|
Total |
20,000 |
70,000 |
40,000 |
|
Net Income (Loss) |
P20,000 |
80,000 |
(20,000) |
Based on the above data, should product line C be continued or eliminated? Justify your answer.
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