Maximize profitability, Toxemia Salsa Corporation

Maximize profitability

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Reference no: EM1357635

Toxemia Salsa Company manufactures five flavors of salsa. Last year, Toxemia generated net operating income of $40,000. The following information was taken from last year's income statement segmented by flavor (brackets indiciate a negative amount):

Wimpy Mild Medium Hot Atomic
Contribution margin $(2,000) $45,000 $35,000 $50,000 $162,000
Segment margin $(16,000) $(5,000) $7,000 $10,000 $94,000
Segment margin less allocated common fixed expenses $(26,000) $(15,000) $(3,000) $0 $84,000

Toxemia expects similar operating results for the upcoming year. If Toxemia wants to maximize its profitability in the upcoming year, which flavor or flavors should Toxemia discontinue?

Reference no: EM1357635

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