Berringer Enterprises manufactures 10 product lines.The following information is available for one of these product lines:
$\begin{array}{lr}
\text { Sales revenue } & \$ 50000 \
\text { Variable costs } &\underline{ 35000} \
\text { Contribution margin } & 15000 \
\text { Fixed costs } &\underline{ 18000} \
\text { Net income } &\underline{ \$(3000)}
\end{array}$

The company's controller is considering dropping the line because it is unprofitable.The controller believes that if the line is dropped,overall company profits are guaranteed to increase.However,the managerial accountant says,'That is not necessarily always the case'.Do you agree or disagree with the accountant? Why or why not?

Question

Berringer Enterprises manufactures 10 product lines.The following information is available for one of these product lines:
$\begin{array}{lr}
\text { Sales revenue } & \$ 50000 \
\text { Variable costs } &\underline{ 35000} \
\text { Contribution margin } & 15000 \
\text { Fixed costs } &\underline{  18000} \
\text { Net income } &\underline{  \$(3000)}
\end{array}$
 
The company's controller is considering dropping the line because it is unprofitable.The controller believes that if the line is dropped,overall company profits are guaranteed to increase.However,the managerial accountant says,'That is not necessarily always the case'.Do you agree or disagree with the accountant? Why or why not?

Quizplus · Accepted Answer

The Answer of Berringer Enterprises manufactures 10 product lines.The following information is available for one of these product lines:
$\begin{array}{lr}
\text { Sales revenue } & \$ 50000 \
\text { Variable costs } &\underline{ 35000} \
\text { Contribution margin } & 15000 \
\text { Fixed costs } &\underline{  18000} \
\text { Net income } &\underline{  \$(3000)}
\end{array}$
 
The company's controller is considering dropping the line because it is unprofitable.The controller believes that if the line is dropped,overall company profits are guaranteed to increase.However,the managerial accountant says,'That is not necessarily always the case'.Do you agree or disagree with the accountant? Why or why not?

Berringer Enterprises Manufactures 10 Product Lines The Company's Controller Is Considering Dropping the Line Because It