Tyler Corporation has provided you with the following budgeted income statement for one of their products: Tyler Corporation believes that 80% of the fixed costs would be avoidable if the product line was dropped. Based on the impact of company's operating income, Tyler should not drop the product line.

Question

Tyler Corporation has provided you with the following budgeted income statement for one of their products:  Tyler Corporation believes that 80% of the fixed costs would be avoidable if the product line was dropped. Based on the impact of company's operating income, Tyler should not drop the product line.

Quizplus · Accepted Answer

Dropping the product line would only result in a 20% reduction in fixed costs, which would not be enough to offset the loss of revenue and contribution margin from the product. Therefore, it is recommended for Tyler Corporation to continue with the product line.

Tyler Corporation Has Provided You with the Following Budgeted Income