Gary Brown Manufacturing makes single kayaks,double kayaks,and lightweight competitive kayaks.The double kayak line has been showing losses for several years,and management is considering dropping the line.Recent income statements have been very similar to the following information which was prepared for the most recent year:
$$\begin{array}{lrrrr}
& \underline{\text{Single}} & \underline{\text{Double}} & \underline{\text{Competitive}} & \underline{\text{Total}} \
\text{Sales} & \$687,500 & \$400,000 & \$1,037,500 & \$2,125,000 \
\text{Variable costs} & \underline{446,875} & \underline{272,000} & \underline{850,750} & \underline{1,569,625} \
\text{Contribution margin} & 240,625 & 128,000 & 186,750 & 555,375 \
\text{Fixed costs} & \underline{156,250} & \underline{162,500} & \underline{143,750} & \underline{462,500} \
\text{Operating income} & \$84,375 & \$34,500 & \$43,000 & \$92,875 \
\end{array}$$ Of the fixed costs,$393,750 is common costs that have been allocated equally to each product line.What will total operating income be if Brown drops the double kayak line?

Question

Gary Brown Manufacturing makes single kayaks,double kayaks,and lightweight competitive kayaks.The double kayak line has been showing losses for several years,and management is considering dropping the line.Recent income statements have been very similar to the following information which was prepared for the most recent year:
 $$\begin{array}{lrrrr} 
& \underline{\text{Single}} & \underline{\text{Double}} & \underline{\text{Competitive}} & \underline{\text{Total}} \
\text{Sales} & \$687,500 & \$400,000 & \$1,037,500 & \$2,125,000 \
\text{Variable costs} & \underline{446,875} & \underline{272,000} & \underline{850,750}  & \underline{1,569,625}  \
\text{Contribution margin} & 240,625 & 128,000 & 186,750 & 555,375 \
\text{Fixed costs} & \underline{156,250} & \underline{162,500} & \underline{143,750} & \underline{462,500} \
\text{Operating income} & \$84,375 & \$34,500 & \$43,000 & \$92,875 \
\end{array}$$ Of the fixed costs,$393,750 is common costs that have been allocated equally to each product line.What will total operating income be if Brown drops the double kayak line?

Quizplus · Accepted Answer

The Answer of Gary Brown Manufacturing makes single kayaks,double kayaks,and lightweight competitive kayaks.The double kayak line has been showing losses for several years,and management is considering dropping the line.Recent income statements have been very similar to the following information which was prepared for the most recent year:
 $$\begin{array}{lrrrr} 
& \underline{\text{Single}} & \underline{\text{Double}} & \underline{\text{Competitive}} & \underline{\text{Total}} \
\text{Sales} & \$687,500 & \$400,000 & \$1,037,500 & \$2,125,000 \
\text{Variable costs} & \underline{446,875} & \underline{272,000} & \underline{850,750}  & \underline{1,569,625}  \
\text{Contribution margin} & 240,625 & 128,000 & 186,750 & 555,375 \
\text{Fixed costs} & \underline{156,250} & \underline{162,500} & \underline{143,750} & \underline{462,500} \
\text{Operating income} & \$84,375 & \$34,500 & \$43,000 & \$92,875 \
\end{array}$$ Of the fixed costs,$393,750 is common costs that have been allocated equally to each product line.What will total operating income be if Brown drops the double kayak line?

Gary Brown Manufacturing Makes Single Kayaks,double Kayaks,and Lightweight Competitive Kayaks