Reference no: EM132649841
Shoes Inc. has three product lines in its retail stores: Boots, Runners, and Luxury. The allocated fixed costs are based on revenue and are unavoidable. Results of the fourth quarter are presented below:
Boots Runners Luxury Total
Units sold 750 1,000 1,200 2,950
Revenue $22,500 $15,000 $9,600 $47,100
Variable departmental costs 12,000 8,000 5,000 25,000
Direct fixed costs 4,000 3,000 4,500 11,500
Allocated fixed costs 4,777 3,185 2,038 10,000
Net income (loss) $ 1,723 $815 $(1,938) $600
Question 1: Demand of individual products is not affected by changes in other product lines. Required In a table format an incremental analysis of the effect of dropping the Luxury product line.
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