The Mansfield Company manufactures and sells two lines of fishing rods. During the most recent accounting period, the Pro line and the Novice line sold 15,000 and 2,000 units, respectively. The company's most recent financial statements are shown below: Pro Novice Sales $900,000 $240,000 Less cost of goods sold: Unit-level production cost 600,000 135,000 Depreciation, production equipment 125,000 50,000 Gross margin $175,000 $55,000 Less operating expenses: Unit-level selling and administrative costs 40,000 65,000 Corporate-level facility expenses (fixed) 36,000 36,000 Net income (loss) $99,000 $46,000 Based on the information given, should the company keep or eliminate the Novice line? IF kept how much does it contribute in total profitability?
The Mansfield Company manufactures and sells two lines of fishing rods. During the most recent accounting period, the Pro line and the Novice line sold 15,000 and 2,000 units, respectively. The company's most recent financial statements are shown below: Pro Novice Sales $900,000 $240,000 Less cost of goods sold: Unit-level production cost 600,000 135,000 Depreciation, production equipment 125,000 50,000 Gross margin $175,000 $55,000 Less operating expenses: Unit-level selling and administrative costs 40,000 65,000 Corporate-level facility expenses (fixed) 36,000 36,000 Net income (loss) $99,000 $46,000 Based on the information given, should the company keep or eliminate the Novice line? IF kept how much does it contribute in total profitability?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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The Mansfield Company manufactures and sells two lines of fishing rods. During the most recent accounting period, the Pro line and the Novice line sold 15,000 and 2,000 units, respectively.
The company's most recent financial statements are shown below:
| Pro | Novice | ||
| Sales | $900,000 | $240,000 | |
| Less cost of goods sold: | |||
| Unit-level production cost | 600,000 | 135,000 | |
| 125,000 | 50,000 | ||
| Gross margin | $175,000 | $55,000 | |
| Less operating expenses: | |||
| Unit-level selling and administrative costs | 40,000 | 65,000 | |
| Corporate-level facility expenses (fixed) | 36,000 | 36,000 | |
| Net income (loss) | $99,000 | $46,000 | |
Based on the information given, should the company keep or eliminate the Novice line? IF kept how much does it contribute in total profitability?
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