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Crisp has 4 product lines: milk, ice cream, yogurt, and butter. The allocated fixed costs are based on units sold and are unavoidable.

Crisp has 4 product lines: milk, ice cream, yogurt, and butter. The allocated fixed costs are based on units sold and are unavoidable. Demand of individual products is not affected by changes in other product lines. 40% of the fixed costs are direct, and the other 60% are allocated. Results of June follow:

Milk

Ice Cream

Yogurt

Butter

Total

Units sold

2,000

500

400

200

3,000

Revenue

$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)

($1,000)

$5,000

$2,800

$8,200

$15,000

Prepare an analysis of the effect of dropping the milk product line.

Should the company drop the milk product line?

Top Answer

Analysis of effect of dropping the milk product Line: Profit of the dropping the Milk product line:- By dropping product Milk... View the full answer

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