The financial information for Jamison drug store by business line is as follows: total drugs cosmetics...

The financial information for Jamison drug store by business line is as follows:

	total	drugs	cosmetics	housewares

sales	$250,000	$125,000	$75,000	$50,000
variable expenses	$105,000	$50,000	$25,000	$30,000
contribution margin	$145,000	$75,000	$50,000	$20,000

fixed expenses
salaries	$50,000	$29,500	$12,500	$8,000
advertising	$15,000	$1,000	$7,500	$6,500
utilities	$2,000	$500	$500	$1,000
depreciation	$5,000	$1,000	$2,000	$2,000
rent	$20,000	$10,000	$6,000	$4,000
insurance	$3,000	$2,000	$500	$500
general administrative	$30,000	$15,000	$9,000	$6,000
total	$125,000	$59,000	$38,000	$28,000

net income/ loss	$20,000	$16,000	$12,000	-$8,000

It was determined that the associated salaries, advertising and insurance would all be eliminated if Jamison drops the housewares segment. The utilities, depreciation, rent and general and administrative fees are all allocations and will not change if Jamison is dropped.

Jamison is currently deciding whether the company would benefit overall if the housewares business line was dropped completely, since it is losing money consistently each month. Using what you know about avoidable and unavoidable costs, advise Jamison as their outside consultant as to which is the better business decision. (Support your work with numbers.)

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ekkarill92 answered 1 year ago

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