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Brislin Company makes and sells two products, Olives and Popeyes. The income statement for the prior year, 2001, was as follows:

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

5,000

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?

Top Answer

The best decision of the company is to continue with the existing programme of production and sale of Popeyes and Olives as... View the full answer

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