The management accountant for the Chocolate S'more Company has prepared the following income statement for the most current year:
$$\begin{array} { l r r r r }
& \text { Chocolate } & \text { Chocolate Lite } & \text { Fudge } & \text { Total } \
\text { Sales } & \$ 40000 & \$ 25000 & \$ 35000 & \$ 100000 \
\text { Cost of goods sold } & 26000 & \underline { 15000 } & \underline { 19000 } & \underline { 60000 } \
\text { Contribution margin } & 14000 & 10000 & 16000 & 40000 \
\text { Delivery and ordering costs } & 2000 & 3000 & 2000 & 7000 \
\text { Rent (per sq. metre used) } & 3000 & 3000 & 2000 & 8000 \
\text { Allocated corporate costs } & 5000 & 5000 & 5000 & 15000 \
\text { Corporate profit } & \$ 4000 & \$ 1000 ) & \$ 7000 & \$ 10000
\end{array}$$
a.Do you recommend discontinuing the Chocolate-Lite product line? Why or why not?
b.If the Chocolate product line had been discontinued,corporate profits for the current year would have decreased by what amount?

Question

The management accountant for the Chocolate S'more Company has prepared the following income statement for the most current year:
 $$\begin{array} { l r r r r } 
& \text { Chocolate } & \text { Chocolate Lite } & \text { Fudge } & \text { Total } \
\text { Sales } & \$ 40000 & \$ 25000 & \$ 35000 & \$ 100000 \
\text { Cost of goods sold } & 26000 & \underline { 15000 } & \underline { 19000 } & \underline { 60000 } \
\text { Contribution margin } & 14000 & 10000 & 16000 & 40000 \
\text { Delivery and ordering costs } & 2000 & 3000 & 2000 & 7000 \
\text { Rent (per sq. metre used) } & 3000 & 3000 & 2000 & 8000 \
\text { Allocated corporate costs } & 5000 & 5000 & 5000 & 15000 \
\text { Corporate profit } & \$ 4000 & \$ 1000 ) & \$ 7000 & \$ 10000
\end{array}$$ 
a.Do you recommend discontinuing the Chocolate-Lite product line? Why or why not?
b.If the Chocolate product line had been discontinued,corporate profits for the current year would have decreased by what amount?

Quizplus · Accepted Answer

The Answer of The management accountant for the Chocolate S'more Company has prepared the following income statement for the most current year:
 $$\begin{array} { l r r r r } 
& \text { Chocolate } & \text { Chocolate Lite } & \text { Fudge } & \text { Total } \
\text { Sales } & \$ 40000 & \$ 25000 & \$ 35000 & \$ 100000 \
\text { Cost of goods sold } & 26000 & \underline { 15000 } & \underline { 19000 } & \underline { 60000 } \
\text { Contribution margin } & 14000 & 10000 & 16000 & 40000 \
\text { Delivery and ordering costs } & 2000 & 3000 & 2000 & 7000 \
\text { Rent (per sq. metre used) } & 3000 & 3000 & 2000 & 8000 \
\text { Allocated corporate costs } & 5000 & 5000 & 5000 & 15000 \
\text { Corporate profit } & \$ 4000 & \$ 1000 ) & \$ 7000 & \$ 10000
\end{array}$$ 
a.Do you recommend discontinuing the Chocolate-Lite product line? Why or why not?
b.If the Chocolate product line had been discontinued,corporate profits for the current year would have decreased by what amount?

The Management Accountant for the Chocolate S'more Company Has Prepared