Northern States Dairy Inc Instructions
Prepare an Incremental Analysis of the Effect of Dropping

Northern States Dairy Inc. has 4 product lines: sour cream ice cream yogurt and butter. The allocated fixed costs are based on units sold and are unavoidable. Demand of individual products is not affected by changes in other product lines. 40% of the fixed costs are direct and the other 60% are allocated. Results of June follow: $\begin{array}{lcccccc}&\text { Sour Cream }&\text{Ice Cream}&\text{ Yocurt }&\text{Butter }&\text{Total }\\ \text { Units sold } & 2,000 & 500 & 400 & 200 & 3,100 \\ \text { Revenue } & \$ 10,000 & \$ 20,000 & \$ 10,000 & \$ 20,000 & \$ 60,000 \\ \text {Variable departmental costs } & 6,000 & 13,000 & 4,200 & 4,800 & 28,000 \\ \text { Fxed costs } & 6,000 & 2,000 & 3,000 & 7,000 & 18,000 \\ \text { Net income (loss) } & \$(2,010) & \$ 5,000 & \$ 2,800 & \$ 8,200 & \$ 14,000 \\\end{array}$
Instructions
Prepare an incremental analysis of the effect of dropping the sour cream product line.