What will be the net effect on profit of the company

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Reference no: EM133655477

Question: Scotts sells both standard and premium bags of mulch. Assume the contribution income statements for both segments below. Standard Premium Total Sales $2,475,000 $375,000 $2,850,000 Less variable costs 1,545,000 255,000 1,800,000 Contribution margin 930,000 120,000 1,050,000 Less fixed cost 435,000 195,000 630,000 Net income (loss) $495,000 $(75,000) $420,000 Management is considering discontinuing the premium segment due to the segment's net loss of $-75,000. Of the total fixed costs for the premium segment, $45,000 would not be incurred (a cost saving) if the premium segment is dropped. Management expects no changes in sales of the standard segment if the premium segment is discontinued. If the premium segment is discontinued, what will be the net effect on profit of the company?

Reference no: EM133655477

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