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Superior gaming a computer enhancement company has three

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Superior Gaming, a computer enhancement company, has three product lines: audio enhancers, video enhancers, and connection-speed accelerators. Common costs are allocated based on relative sales. A product line income statement for the year ended December 31, 2011 follows:


 Audio
Video
Accelerators Total
Sales $1,045,000
$2,255,000
$2,200,000
$5,500,000
Less COGS 575,000
1,240,000
1,870,000
3,685,000
Gross margin 470,000
1,015,000
330,000
1,815,000
Less other var costs 53,000
69,000
20,000
142,000
Contribution margin 417,000
946,000
310,000
1,673,000
Less direct salaries 155,000
175,000
65,000
395,000
Less common fixed costs:






Rent 11,970
25,830
25,200
63,000
Utilities 4,370
9,430
9,200
23,000
Depreciation 5,890
12,710
12,400
31,000
Other admin costs 79,230
170,970
166,800
417,000
Net income $160,540
$552,060
$31,400
$744,000

Since the profit for accelerators is relatively low, the company is considering dropping this product line. What is the incremental effect of dropping accelerators?

Reference no: EM13591859

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