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Question - Brislin Company makes and sells two products, Olives and Popeyes. The income statement for the prior year, 2001, was as follows:
Olives
Popeyes
Sales
$16,000
$24,000
Variable cost of goods sold
6,000
10,000
Manufacturing contribution margin
$10,000
$14,000
Fixed production
5,000
7,000
Variable selling and administration
2,000
Fixed selling and administration
1,000
3,000
Net income
$2,000
($1,000)
Brislin's fixed costs are unavoidable and are allocated to products on the basis of sales revenue. If Popeyes are dropped, sales of Olives are expected to increase by 40 percent next year. What is the best decision of the company?
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