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Chapter 11 Example - Chapter 11 Examples 1 Dropping a...

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1. Dropping a segment or product line:  Macon sells both leashes and collars and  are considering dropping the leash division based on the following income  statement: Leashes                                      Collars     TOTAL     Sales $200,000 $300,000 $500,000 VC (100,000)                                   (125,000)                  (225,000)     CM 100,000 175,000 275,000 FC (150,000)                                   (150,000)                  (300,000)     NI $(50,000)  $25,000 $(25,000) a.) If the FC are allocated 50/50 and will still be there regardless of our decision  & there is not additional demand for collars, should we discontinue? b.) If the FC are allocated 50/50 and will still be there regardless but we can use  the additional capacity to make 30% more collars, should we discontinue? c.) If leash FC are 75% traceable directly to the leash division and the rest  common, should we discontinue (using the increased sales level)?
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