Reference no: EM131624864

Problem

Sipacore Unlimited produces and sells three lines of carpet: economy, standard, and deluxe. Jeff Choi, the chief financial officer of the company, has prepared the following report on the profitability in the past year. In the report, fixed costs are allocated based on yards of carpet.

	Economy Standard		Deluxe	Total
Yards of carpet	30,200	45,300	75,500	151,000
Sales	$322,000	$713,000	$1,543,700	$2,578,700
Less variable costs (dye, yarn, labor, etc.)	173,300	435,400	930,000	1,538,700
Less fixed costs (depreciation, supervisory salaries, etc.)	161,880	242,820	404,700	809,400
Profit (loss)	$(13,180)	$34,780	$209,000	$230,600

Upon seeing the report, Matt Williams, the president of Sipacore Unlimited, suggested that the company should consider dropping the economy grade and concentrate on the two other lines. Jeff replied, however, that would lead to the cost allocation death spiral.

Revise the report assuming the company drops the economy grade. (Enter loss using either a negative sign preceding the number e.g. -45 or parentheses e.g.

If either the standard or the deluxe grades is reporting a loss in part a, revise the report assuming that it is also dropped. (Enter loss using either a negative sign preceding the number e.g. -45 or parentheses e.g.