Reference no: EM132516659

Keith Smoothies has 4 product lines: sour cream, ice cream, yogurt, and butter. Demand of individual products is not affected by changes in other product lines. 30% of the fixed costs are direct, and the other 70% are allocated.

Results of February were as follows:

                                                        Sour Cream          Ice Cream             Yogurt                   Butter                         Total

Units sold                                     2,000                     500               400                    200                        3,100

Revenue (Sh)                               10,000                        20,000          10,000             20,000                 60,000

Variable departmental costs             6,000                           13,000            4,200             4,800                  28,000

Fixed costs                                  5,000                              2,000              3,000             7,000                 17,000

Net income (loss)                           Sh (1,000)                    Sh 5,000           Sh 2,800         Sh 8,200             Sh 15,000

Question 1: Would it be a good decision to drop the sour cream product line?