(b)What would be the effect on income if product A were dropped?Net income wouldeTextbook and Mediaby $ Cullumber Toys' management is considering eliminating product A, which has been showing a loss for several years. The company'sannual income statement, is as follows:SalesVariable expensesContribution marginAdvertising expenseDepreciation expenseCorporate expensesTotal fixed expensesOperating incomeA$2,247,0001,632,000$615,000$517,00015,90093,900$626,800$(11,800)B$1,404,000600,400$803,600$430,00010,00081,600$521,600$282,000C$1,809,3001,095,200$714,100$520,00020,600105,000$645,600$68,500Total$5,460,3003,327,600$2,132,700$1,467,00046,500280,500$1,794,000$338,700Advertising expense - Specific to each product.Depreciation expense - Specific to each product; no other use available, no resale value.Corporate expenses - Allocated based on number of employees.

Differential analysis is a management accounting technique in which we assess only the changes in…

Answered: (b) What would be the effect on income…

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(b) What would be the effect on income if product A were dropped? Net income would by $

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Cullumber Toys' management is considering eliminating product A, which has been showing a loss for several years. The company's annual income statement, is as follows: Sales Variable expenses Contribution margin Advertising expense Depreciation expense Corporate expenses Total fixed expenses Operating income (a) enses margin Direct fixed expenses rgin C $2,247.000 $1,404,000 $1,809,300 $5,460,300 1,632,000 600,400 1,095,200 3,327,600 $615,000 $803,600 $714,100 $2,132,700 $517.000 $430,000 $520,000 $1,467,000 15,900 46,500 93,900 105,000 280,500 $626,800 $645,600 $1,794,000 $(11,800) $68,500 $338,700 A Advertising expense - Specific to each product. Depreciation expense - Specific to each product; no other use available, no resale value. Corporate expenses - Allocated based on number of employees. Restate the income statement in segment margin format. Common fixed expenses 1: ofit B $ 10,000 $ 81,600 $521,600 $282,000 20,600 A Total $ B
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