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Les Objets Volants (LOJ), S.A., of France, makes aircraft equipment. The company has been experiencing losses on its fuel pump product line for several years. The most recent quarterly income statement for the fuel pump product line follows: Sales Less: Variable expenses: LES OBJETS VOLANTS S.A. Income Statement-Fuel Pump For the Quarter Ended March 31 Variable manufacturing expenses Sales commissions Shipping Total variable expenses Contribution margin Less: Fixed expenses: Advertising Depreciation of equipment (no resale value) General factory overhead Salary of Insurance on inventories product-line manager. Purchasing department expenses Total fixed expenses Net operating loss. *Common costs allocated on the basis of machine-hours. *common costs allocated on the basis of sales dollars. Net advantage (disadvantage) of dropping the line € 320,000 66,000 14,000 Should the fuel pump product line be discontinued? 290,000 90,000 149,000* 38,000 18,000 65,000+ € 1,000,000 400,000 600,000 The currency in France is the euro, denoted by €. Discontinuing the fuel pump product line would not affect sales of other product lines and would have no noticeable effect on the company's total general factory overhead or total purchasing department expenses. Required: Compute the net advantage or disadvantage if the fuel pump product line be discontinued? (Negative amount should be indicated by a minus sign.) 650,000 (50,000)

Les Objets Volants (LOJ), S.A., of France, makes aircraft equipment. The company has been experiencing losses on its fuel pump product line for several years. The most recent quarterly income statement for the fuel pump product line follows: Sales Less: Variable expenses: LES OBJETS VOLANTS S.A. Income Statement-Fuel Pump For the Quarter Ended March 31 Variable manufacturing expenses Sales commissions Shipping Total variable expenses Contribution margin Less: Fixed expenses: Advertising Depreciation of equipment (no resale value) General factory overhead Salary of Insurance on inventories product-line manager. Purchasing department expenses Total fixed expenses Net operating loss. *Common costs allocated on the basis of machine-hours. *common costs allocated on the basis of sales dollars. Net advantage (disadvantage) of dropping the line € 320,000 66,000 14,000 Should the fuel pump product line be discontinued? 290,000 90,000 149,000* 38,000 18,000 65,000+ € 1,000,000 400,000 600,000 The currency in France is the euro, denoted by €. Discontinuing the fuel pump product line would not affect sales of other product lines and would have no noticeable effect on the company's total general factory overhead or total purchasing department expenses. Required: Compute the net advantage or disadvantage if the fuel pump product line be discontinued? (Negative amount should be indicated by a minus sign.) 650,000 (50,000)

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter11: Differential Analysis And Product Pricing
Section: Chapter Questions
Problem 3E: Differential analysis for a discontinued product A condensed income statement by product line for...
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Les Objets Volants (LOJ), S.A., of France, makes aircraft equipment. The company has been experiencing losses on its fuel pump product line for several years. The most recent quarterly income statement for the fuel pump product line follows: Sales Less: Variable expenses: LES OBJETS VOLANTS S.A. Income Statement-Fuel Pump For the Quarter Ended March 31 Variable manufacturing expenses Sales commissions Shipping Total variable expenses Contribution margin Less: Fixed expenses: Advertising Depreciation of equipment (no resale value) General factory overhead Salary of product-line manager Insurance on inventories Purchasing department expenses Total fixed expenses Net operating loss *Common costs allocated on the basis of machine-hours. *common costs allocated on the basis of sales dollars. Net advantage (disadvantage) of dropping the line € 320,000 66,000 14,000 Should the fuel pump product line be discontinued? 290,000 90.000 149,000* 38,000 18,000 65,000+ € 1,000,000 € 400,000 600,000 The currency in France is the euro, denoted by €. Discontinuing the fuel pump product line would not affect sales of other product lines and would have no noticeable effect on the company's total general factory overhead or total purchasing department expenses. Required: Compute the net advantage or disadvantage if the fuel pump product line be discontinued? (Negative amount should be indicated by a minus sign.) 650,000 (50,000)
Transcribed Image Text:Les Objets Volants (LOJ), S.A., of France, makes aircraft equipment. The company has been experiencing losses on its fuel pump product line for several years. The most recent quarterly income statement for the fuel pump product line follows: Sales Less: Variable expenses: LES OBJETS VOLANTS S.A. Income Statement-Fuel Pump For the Quarter Ended March 31 Variable manufacturing expenses Sales commissions Shipping Total variable expenses Contribution margin Less: Fixed expenses: Advertising Depreciation of equipment (no resale value) General factory overhead Salary of product-line manager Insurance on inventories Purchasing department expenses Total fixed expenses Net operating loss *Common costs allocated on the basis of machine-hours. *common costs allocated on the basis of sales dollars. Net advantage (disadvantage) of dropping the line € 320,000 66,000 14,000 Should the fuel pump product line be discontinued? 290,000 90.000 149,000* 38,000 18,000 65,000+ € 1,000,000 € 400,000 600,000 The currency in France is the euro, denoted by €. Discontinuing the fuel pump product line would not affect sales of other product lines and would have no noticeable effect on the company's total general factory overhead or total purchasing department expenses. Required: Compute the net advantage or disadvantage if the fuel pump product line be discontinued? (Negative amount should be indicated by a minus sign.) 650,000 (50,000)
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