Answer:
Contribution margin for :
STRIP PLANK Income Statement
$ 360,000 $ 190,000 Total Net Sales
-$ 225,000 -$ 120,000 Variable Cost
$ 135,000 $ 70,000 Contributing Margin
It's more effective to keep the parquet product line, the company get
an extra return of $5,000.
Explanation:
With all the product line operating these are the results:
STRIP PLANK PARQUET Total Income Statement
$ 400,000 $ 200,000 $ 300,000 $ 900,000 Total Net Sales
-$ 225,000 -$ 120,000 -$ 250,000 -$ 595,000 Variable Cost
$ 175,000 $ 80,000 $ 50,000 $ 305,000 Contributing Margin
-$ 5,000 -$ 20,000 -$ 50,000 -$ 75,000 Machine Rent
-$ 15,000 -$ 10,000 -$ 20,000 -$ 45,000 Supervision
-$ 35,000 -$ 10,000 -$ 25,000 -$ 70,000 Depreciation
$ 120,000 $ 40,000 -$ 45,000 $ 115,000 Segment Margin
If the company keeps the parquet line will get worst result during the year.
STRIP PLANK PARQUET Total Income Statement
$ 360,000 $ 190,000 $ 0,000 $ 550,000 Total Net Sales
-$ 225,000 -$ 120,000 $ 0,000 -$ 345,000 Variable Cost
$ 135,000 $ 70,000 $ 0,000 $ 205,000 Contributing Margin
-$ 5,000 -$ 20,000 -$ 10,000 -$ 35,000 Machine Rent
-$ 15,000 -$ 10,000 $ 0,000 -$ 25,000 Supervision
-$ 35,000 -$ 10,000 $ 0,000 -$ 45,000 Depreciation
$ 80,000 $ 30,000 -$ 10,000 $ 100,000 Segment Margin
