Current Attempt in Progress Swifty Corporation produces three versions of baseball bats: wood, aluminum, and hard rubber. A condensed segmented income statement for a recent period follows: Wood Aluminum Hard Rubber Total Sales $550000 $240000 $65000 $855000 Variable expenses 345000 180000 58000 583000 Contribution margin 205000 60000 7000 272000 Fixed expenses 75000 35000 22000 132000 Net income (loss) $130000 $ 25000 $ (15000) $140000 Assume none of the fixed expenses for the hard rubber line are avoidable. What will be total net income if the line is dropped?

Question

Nevaeh

Business

11 December, 21:06

Current Attempt in Progress Swifty Corporation produces three versions of baseball bats: wood, aluminum, and hard rubber. A condensed segmented income statement for a recent period follows: Wood Aluminum Hard Rubber Total Sales $550000 $240000 $65000 $855000 Variable expenses 345000 180000 58000 583000 Contribution margin 205000 60000 7000 272000 Fixed expenses 75000 35000 22000 132000 Net income (loss) $130000 $ 25000 $ (15000) $140000 Assume none of the fixed expenses for the hard rubber line are avoidable. What will be total net income if the line is dropped?

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Answers (1)

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Avery Curtis · Answer 1

None of the fixed costs are avoidable. Therefore the company now loses all the fixed costs and the positive contribution margin.

Explanation:

Giving the following information:

Wood Aluminum Hard Rubber

Total Sales $65000

Variable expenses (58000)

Contribution margin 7000

Fixed expenses (22000)

Net income (loss) (15000)

Effect on income = - 22,000 - 7,000 = - 29,000

None of the fixed costs are avoidable. Therefore the company now loses all the fixed costs and the positive contribution margin.