Triple Threat Toys produces dolls, action fiqures and building sets. The accountants prepared a segmented...
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Accounting
Triple Threat Toys produces dolls, action fiqures and building sets. The accountants prepared a segmented contribution income statement for the three types of products manufacutured for the last year. The executive management team is concerned that the dolls segment has been showing a loss for the past few years.
Action Fiqures
dolls
Building Sets
Total
Revenue
125000
200000
225000
550000
Less:Variable costs
76000
165000
165000
406000
contribution margin
49000
35000
60000
144000
less:Fixed costs
40000
40000
40000
120000
Income from operations
9000
5000
20000
24000
Recommed whether Triple Threat should keep or drop the dolls equipment product line based on the following independent scenarios .
A) If the line is dropped, assume that all fixed costs relating to the doll product line segment would remain with the company
b) Assume that the company would no longer incur all the fixed costs relating to the doll product segment if it drops the product line.
c) Assume that 10% of fixed costs related to the doll product segment would remain with the company if the product line dropped.
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