Reference no: EM131786294

Assignment

Determine if the product line should be dropped given the following information.

-Salaries expense relates directly to the employees working in the product line and employees would be discharged if the product line is dropped.

-The advertising expenses represents the company as a whole and are not dependent on the individual segment line

-Rent expense will be reduced by 5,000 due to decreasing lease space

-The utilities represent the cost for the company as whole and not individual product lines

Contribution Margin	45,000
Salaries	30,000
Advertising	20,000
Rent	10,000
Utilities	20,000

a) Should not be dropped since the lost contribution margin is $10,000 greater than the avoided fixed expenses.
b) Should not be dropped since the lost contribution margin is $30,000 greater than the avoided fixed expenses.
c) Should be dropped since the lost contribution margin is $10,000 less than the avoided fixed expenses.
d) Should be dropped since the lost contribution margin is $20,000 less than the avoided fixed expenses.