Nation narrow assurance company provides both automobile

Reference no: EM13608355

Nation Narrow Assurance Company provides both automobile and life insurance to its customers. Income statements for the two products for the most recent year appear below: Automobile Insurance Life Insurance Sales revenue ................................ $4,000,000 $12,000,000 Variable costs ................................ 3,510,000 9,600,000 Contribution margin ........................... 490,000 2,400,000 Fixed costs ................................... 600,000 700,000 Net income/loss ............................... <110,000> 1,700,000 The president of the company is considerimg dropping the automobile insurance product line. However, some policyholder prefer having their auto and life insurance with the same company, so if automobile insurance is dropped, sale of life insurance will drop by 10%. Assume that $100,000 of the fixed costs assigned to automobile insurance are unavoidable and thus will continue whether or not automobile insurance is dropped. Calculate the decrease in company profits if the automobile insurance product line is dropped..

Reference no: EM13608355

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