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Pepper's Automotive has further analyzed the exhaust division into three products, exhaust pipes, intake valves, and intake pipes. The income statement is available below. What is the change in profit in both the short run and long run by dropping intake valves from their product line?
Exhaust Pipes Intake Valves Intake Pipes
Net revenues
$500,000
$300,000
$200,000
Variable costs
50,000
150,000
100,000
Contribution margin
450,000
Controllable fixed costs
0
Controllable margin
400,000
Noncontrollable fixed costs
Contribution by profit center
$ (50,000)
$ 50,000
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