Answer the following questions using the information below:
The management accountant for Giada's Book Store has prepared the following income statement for the most current year:
$\begin{array}{lrrrr}
&\text { Cookbook }&\text { Travel Book }&\text { Classics }&\text { Total }\
\text { Sales } & \$ 60,000 & \$ 100,000 & \$ 40,000 & \$ 200,000 \
\text { Cost of goods sold } & 36,000 & 65,000 & 20,000 & 121,000 \
\text { Contribution margin } & 24,000 & 35,000 & 20,000 & 79,000 \
\text { Order and delivery processing } & 18,000 & 21,000 & 8,000 & 47,000\
\text { Rent (per sq. foot used) } & 2,000 & 1,000 & 3,000 & 6,000 \
\text { Allocated corporate costs } & 7,000 & 7,000 & 7,000 & 21,000 \
\text { Corporate profit } & \$(3,000) & \$ 6,000 & \$ 2,000 & \$ 5,000
\end{array}$
-If the travel book line had been discontinued,corporate profits for the current year would have decreased by ________.
A) $35,000
B) $14,000
C) $13,000
D) $6,000

Question

Answer the following questions using the information below:
The management accountant for Giada's Book Store has prepared the following income statement for the most current year:
 $\begin{array}{lrrrr}
&\text { Cookbook }&\text { Travel Book }&\text { Classics }&\text { Total }\
\text { Sales } & \$ 60,000 & \$ 100,000 & \$ 40,000 & \$ 200,000 \
\text { Cost of goods sold } & 36,000 & 65,000 & 20,000 & 121,000 \
\text { Contribution margin } & 24,000 & 35,000 & 20,000 & 79,000 \
\text { Order and delivery processing } & 18,000 & 21,000 & 8,000 & 47,000\
\text { Rent (per sq. foot used) } & 2,000 & 1,000 & 3,000 & 6,000 \
\text { Allocated corporate costs } & 7,000 & 7,000 & 7,000 & 21,000 \
\text { Corporate profit } & \$(3,000) & \$ 6,000 & \$ 2,000 & \$ 5,000
\end{array}$
-If the travel book line had been discontinued,corporate profits for the current year would have decreased by ________.
A) $35,000
B) $14,000
C) $13,000
D) $6,000

Quizplus · Accepted Answer

If the travel book line is discontinued, the contribution margin of $35,000 would be lost, but the order and delivery processing cost of $21,000 would be saved. Therefore, the decrease in corporate profits would be $35,000 - $21,000 = $14,000. However, the allocated corporate costs of $7,000 are not avoidable, so the net decrease in profits would be $14,000 - $7,000 = $7,000. Since the corporate profit from the travel book line is $6,000, the decrease in corporate profits would be $13,000.

Answer the Following Questions Using the Information Below: the Management

Answer the Following Questions Using the Information Below:
the Management