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Question - Woodruff Ltd. sells three rocking chairs (Unfinished, Stained and Painted) that use common facilities. The relevant data concerning these three products follow.
Unfinished
Stained
Painted
Total
Sales
$10,000
$30,000
$40,000
$80,000
Variable costs
5,000
20,000
25,000
50,000
Contribution Margin
$5,000
$15,000
Fixed costs
15,000
30,000
Operating loss
$0
$(5,000)
$(15,000)
$(20,000)
Required: If $15 000 of the fixed costs allocated to the Painted rocking chairs are avoidable and the company drops Painted rockers from its product line, what will be the impact on profit?
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