Exercise Equipment Enterprises currently produces several products. Exercycle Model LM01 is showing a net operating loss as indicated by the following condensed income statement prepared for the year ended December 31.
You have been hired by Exercise Equipment Enterprises to help analyze the decision as to whether to eliminate Exercycle Model LM01. Upon investigation, you discover that if Exercycle Model LM01 is eliminated, $55,000 of the fixed costs shown on the above condensed income statement can be eliminated. The remainder of the fixed costs allocated to Exercycle Model LM01 are common fixed costs that will be allocated to the remaining two products produced by Exercise Equipment Enterprises.
Determine if Exercise Equipment Enterprises should discontinue Exercycle Model LM01.

Question

Exercise Equipment Enterprises currently produces several products. Exercycle Model LM01 is showing a net operating loss as indicated by the following condensed income statement prepared for the year ended December 31.  
You have been hired by Exercise Equipment Enterprises to help analyze the decision as to whether to eliminate Exercycle Model LM01. Upon investigation, you discover that if Exercycle Model LM01 is eliminated, $55,000 of the fixed costs shown on the above condensed income statement can be eliminated. The remainder of the fixed costs allocated to Exercycle Model LM01 are common fixed costs that will be allocated to the remaining two products produced by Exercise Equipment Enterprises.
Determine if Exercise Equipment Enterprises should discontinue Exercycle Model LM01.

Quizplus · Accepted Answer

The Answer of Exercise Equipment Enterprises currently produces several products. Exercycle Model LM01 is showing a net operating loss as indicated by the following condensed income statement prepared for the year ended December 31.  
You have been hired by Exercise Equipment Enterprises to help analyze the decision as to whether to eliminate Exercycle Model LM01. Upon investigation, you discover that if Exercycle Model LM01 is eliminated, $55,000 of the fixed costs shown on the above condensed income statement can be eliminated. The remainder of the fixed costs allocated to Exercycle Model LM01 are common fixed costs that will be allocated to the remaining two products produced by Exercise Equipment Enterprises.
Determine if Exercise Equipment Enterprises should discontinue Exercycle Model LM01.

Exercise Equipment Enterprises Currently Produces Several Products