Assume the chocolate clusters are not dropped and the

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Reference no: EM13583317

A candy company makes Chocolate and Peanut clusters which produced the following results last year.


Chocolate

Peanut

Total


Sales

$500,000

$600,000

$1,100,000


Variable costs

420,000

350,000

$770,000


Contribution margin

80,000

250,000

$330,000


Direct fixed costs

50,000

15,000

$65,000


Allocated fixed costs

45,000

55,000

$100,000


Net Income

($15,000)

$180,000

$165,000


A. Should the Chocolate be dropped?   

B. Explain your answer for item (a).

C. What would happen to overall net income if the chocolate was dropped?

D. Assume the chocolate clusters are not dropped and the peanut lost 15% of its sales. What would be the effect on net income?

Reference no: EM13583317

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