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In: Accounting

XYZ has been experiencing losses on its Widget line for several years. Here is the most...

XYZ has been experiencing losses on its Widget line for several years. Here is the most recent contribution margin statement:

Sales        850,000
VC:
Variable Manufacturing        330,000
Sales Commissions          42,000
Shipping          18,000
Total VC        390,000
Contribution Margin        460,000
FC:
Advertising (traceable)        270,000
Depreciation (no resale)          80,000
General Factory OH        105,000
Product Manger Salary          32,000
Insurance on Inventory            8,000
Purchasing Department          45,000
Total FC        540,000
Net Op Loss        (80,000)

The general factory overhead is a common cost allocated on the basis of machine hours

The Purchasing department is a common cost allocated on the basis of sales dollars.

What is the total relevant costs in the decision to drop this line?

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ekkarill92 answered 5 months ago
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