Question

Lisah Inc. manufactures golf clubs in three models. For the year, the Big Bart line has a net loss of $10,000 from sales $200,000, variable costs $180,000, and fixed costs $30,000. If the Big Bart line is eliminated, $20,000 of fixed costs will remain. Prepare an analysis showing whether the Big Bart line should be eliminated.

Answer 1

Answer:

draw a angle /

with the same

Answer 2

Given,

• the big bart line has a net loss 10,000$ from sales 200,000$.
• variable costs 180,000$ and fixed costs 30,000$.
• after eliminated bart line, 20,000$ fixed costs is remaining.

To Find: prepare an analysis showing whether the big bart line should be eliminated.

explanation:

The preparation of the analysis is shown below:

 Particulars             Continue              Eliminate                Net income

                                                                                                (decrease)

   sales                      200,000$                   0$                    -20,000$  

less: variable costs    180,000$                   0$                    -180,000$    

contribution margin    20,000$                   0$                    -20,000$

Fixed costs                  30,000$              20,000$                10,000$

Net income/loss          10,000$               20,000$               -10,000$

As we can see that in both cases whether it is eliminate or continue the amount comes in negative but in continue, there is less loss in comparison with eliminate. In this case the big bart line will be continued.