Aqua Life Jackets, Inc. has three product lines as shown below. The company is considering...
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Accounting
Aqua Life Jackets, Inc. has three product lines as shown below. The company is considering whether or not to eliminate any of its product lines. The results from the past year are shown below.
Infant
Children
Adults
Total
Sales
$1,500,000
$5,000,000
$12,000,000
$18,500,000
Variable Costs
$1,600,000
3,500,000
7,400,000
12,500,000
Contribution Margin
(100,000)
1,500,000
4,600,000
6,000,000
Fixed Costs
400,000
1,600,000
2,000,000
4,000,000
Opertating Income
(500,000)
(100,000)
2,600,000
2,000,000
205 of the fixed costs in each segment are direct to that segment. the rest of the fixed costs are common allocated fixed costs that would remain with the company whether any segment is dropped. Identify which (if any) of the product lines should be eliminated.
1.______ (Adult) A. Eliminate
2.______(Children) B. Keep
3.______(Infant)
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