Blowing Sand Company produces the Drafty model fan, which currently has a net loss of...
70.2K
Verified Solution
Link Copied!
Question
Accounting
Blowing Sand Company produces the Drafty model fan, which currently has a net loss of $39,000 as follows:
Drafty Model
Sales revenue
$
160,000
Less: Variable costs
112,000
Contribution margin
$
48,000
Less: Direct fixed costs
41,000
Segment margin
$
7,000
Less: Common fixed costs
46,000
Net operating income (loss)
$
(39,000)
Eliminating the Drafty product line would eliminate $41,000 of direct fixed costs. The $46,000 of common fixed costs would be redistributed to Blowing Sands remaining product lines. Will Blowing Sands net operating income increase or decrease if the Drafty model is eliminated? By how much?
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
