Brown Bear Merchandising Inc. has three product lines in its retail stores: books videos and music. Results of the fourth quarter are presented below: $\begin{array}{lcccc}
&\text { Books }& \text { Music } & \text { Videos }& \text { Total }\
\text { Revenue } & \$ 25,000 & \$ 40,000 & \$ 28,000 & \$ 93,000 \
\text { Variable departmental costs } & 17,000 & 21,000 & 12,000 & 50,000 \
\text { Direct fixed costs } & 4,000 & 6,000 & 3,000 & 13,000 \
\text { Allocated fixed costs } & 5,000 & 5.000 & 5.000 & 15.000 \
\text { Net income (loss) } & \$(1,000) & \$ 8,000 & \$ 8,000 & \$ 15,000 \
\end{array}$
The allocated fixed costs are unavoidable. Demand for individual products is not affected by changes in other product lines.
Instructions
What will happen to profits if Brown Bear discontinues the Books product line?

Question

Brown Bear Merchandising Inc. has three product lines in its retail stores: books videos and music. Results of the fourth quarter are presented below: $\begin{array}{lcccc}
&\text { Books }& \text { Music } & \text { Videos }& \text { Total }\
 \text { Revenue } & \$ 25,000 & \$ 40,000 & \$ 28,000 & \$ 93,000 \
\text { Variable departmental costs } & 17,000 & 21,000 & 12,000 & 50,000 \
 \text { Direct fixed costs } & 4,000 & 6,000 & 3,000 & 13,000 \
 \text { Allocated fixed costs } & 5,000 & 5.000 & 5.000 & 15.000 \
 \text { Net income (loss) } & \$(1,000) & \$ 8,000 & \$ 8,000 & \$ 15,000 \
\end{array}$
 The allocated fixed costs are unavoidable. Demand for individual products is not affected by changes in other product lines.
Instructions
What will happen to profits if Brown Bear discontinues the Books product line?

Quizplus · Accepted Answer

The Answer of Brown Bear Merchandising Inc. has three product lines in its retail stores: books videos and music. Results of the fourth quarter are presented below: $\begin{array}{lcccc}
&\text { Books }& \text { Music } & \text { Videos }& \text { Total }\
 \text { Revenue } & \$ 25,000 & \$ 40,000 & \$ 28,000 & \$ 93,000 \
\text { Variable departmental costs } & 17,000 & 21,000 & 12,000 & 50,000 \
 \text { Direct fixed costs } & 4,000 & 6,000 & 3,000 & 13,000 \
 \text { Allocated fixed costs } & 5,000 & 5.000 & 5.000 & 15.000 \
 \text { Net income (loss) } & \$(1,000) & \$ 8,000 & \$ 8,000 & \$ 15,000 \
\end{array}$
 The allocated fixed costs are unavoidable. Demand for individual products is not affected by changes in other product lines.
Instructions
What will happen to profits if Brown Bear discontinues the Books product line?

Brown Bear Merchandising Inc The Allocated Fixed Costs Are Unavoidable