Computer village sells computer equipment and home office

Reference no: EM13588996

Computer Village sells computer equipment and home office furniture. Currently the furniture product line takes up approximately 50 percent of the company's retail floor space. The president of Computer Village is trying to decide whether the company should continue offering furniture or concentrate on computer equipment. Below is a product line income statement for the company. If furniture is dropped, salaries and other direct fixed costs can be avoided. In addition, sales of computer equipment can increase by 12.00 percent without affecting direct fixed costs. Allocated fixed costs are assigned based on relative sales.

		Computer Equipment	Home Office Furniture	Total
Sales		$1,400,000	$1,078,000	$2,478,000
Less cost of goods sold		910,000	784,000	1,694,000
Contribution margin		490,000	294,000	784,000
Less direct fixed costs:
	Salaries	176,400	176,400	352,800
	Other	58,800	58,800	117,600
Less allocated fixed costs:
	Rent	13,540	10,460	24,000
	Insurance	3,270	2,670	5,940
	Cleaning	3,920	3,050	6,970
	President's salary	72,170	56,720	128,890
	Other	66,670	5,230	71,900
Net income / (loss)		$95,230	$(19,330)	$75,900

Determine whether Computer Village should discontinue the furniture line and the financial benefit (cost) of dropping it.

Net income without Home Office Furniture is $. The company _____________ (should be indifferent between dropping or not dropping, should drop or should not drop) the Home Office Furniture product line.

Reference no: EM13588996

Questions Cloud

How will this 200000 us dollar difference be shown on the : 1 under gaap when a company installs safety andor environmental devices in excess of what the law mandates it is

You are part of a group of individuals incorporators who : you are part of a group of individuals incorporators who want to form a new corporation. during discussions on forming

A proton charge 16 x 10-19 travels through a magnetic : question a proton charge 1.6 x 10-19 travels through a magnetic field of 1.78t with a velocity of 2.3 x 105 msec. what

The robinson corporation has 53 million of bonds : the robinson corporation has 53 million of bonds outstanding that were issued at a coupon rate of 7 12 percent seven

Computer village sells computer equipment and home office : computer village sells computer equipment and home office furniture. currently the furniture product line takes up

What is the difference between a data flow diagram for the : what is the difference between a data flow diagram for the sales process and a system flowchart describing the sales

A electric wire with 385a current is placed in a magnetic : question a electric wire with 3.85a current is placed in a magnetic field of strength .97 t. the .54m long wire makes

What is the effective interest rate on a 3-month : what is the effective interest rate on a 3-month noninterest-bearing note with a stated rate of 12.6 and a maturity

According to the companys standards 004 direct labor-hours : logistics solutions provides order fulfillment services for dot.com merchants. the company maintains warehouses that

User Account

All Pages