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Discuss what is the incremental benefit to the company

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A company is considering eliminating one of its products. The summarized income statement for the product (Product 101) is as follows:

Sales

$2165764

Variable costs

1401210

 

Contribution margin

764554

 

Fixed costs

936847

 

Operating loss

$-172293

 

If the product 101 is dropped, the sales of product 108 will increase by 22.22%. Product 108's sales are $2672913 and its contribution margin ratio is 31.12%. Of the $936847 of Product 101's fixed costs, only $262194 of costs are avoidable. What is the incremental benefit (cost) to the company if Product 101 is dropped?

Reference no: EM131792330

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