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Lion Candies makes three types of chocolate candy bars. The head of marketing, Nathan Lord found the chart below and believes the company should drop the Almond line. He asks controller, Faye Martin, to review the situation and determine the fate of the Almond Line. Sales Variable Costs Fixed Costs Segment Income Solid Chocolate 300,000 $ (100,000) $ (150,000) $ 50,000 $ Crispy Chocolate $ Almond Chocolate 400,000 (250,000) (200,000) (50,000) 500,000 $ $ (150,000) (250,000) $ 100,000 $ If the Almond line is dropped, the sales of the other lines would be affected and the company would expect to experience a 10% drop in sales volume of Solid and Crispy Chocolate. In addition, the company's fixed costs would be reduced by 25%. Required: a. At what sales revenue of the Almond Line would the company be indifferent between keeping and dropping the product Line. b. Should the company drop the Almond Line if the company expects its sales to be $300,000? How about $400,000?

Lion Candies makes three types of chocolate candy bars. The head of marketing, Nathan Lord found the chart below and believes the company should drop the Almond line. He asks controller, Faye Martin, to review the situation and determine the fate of the Almond Line. Sales Variable Costs Fixed Costs Segment Income Solid Chocolate 300,000 $ (100,000) $ (150,000) $ 50,000 $ Crispy Chocolate $ Almond Chocolate 400,000 (250,000) (200,000) (50,000) 500,000 $ $ (150,000) (250,000) $ 100,000 $ If the Almond line is dropped, the sales of the other lines would be affected and the company would expect to experience a 10% drop in sales volume of Solid and Crispy Chocolate. In addition, the company's fixed costs would be reduced by 25%. Required: a. At what sales revenue of the Almond Line would the company be indifferent between keeping and dropping the product Line. b. Should the company drop the Almond Line if the company expects its sales to be $300,000? How about $400,000?

FINANCIAL ACCOUNTING
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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Lion Candies makes three types of chocolate candy bars. The head of marketing, Nathan Lord found the chart below and believes the company should drop the Almond line. He asks controller, Faye Martin, to review the situation and determine the fate of the Almond Line. Sales Variable Costs Fixed Costs Segment Income Solid Chocolate $ $ $ Crispy Chocolate $ 300,000 (100,000) $ (150,000) $ 50,000 $ Almond Chocolate 400,000 (250,000) (200,000) (50,000) 500,000 $ (150,000) $ (250,000) $ 100,000 $ If the Almond line is dropped, the sales of the other lines would be affected and the company would expect to experience a 10% drop in sales volume of Solid and Crispy Chocolate. In addition, the company's fixed costs would be reduced by 25%. Required: a. At what sales revenue & the Almond Line would the company be indifferent between keeping and dropping the product Line. b. Should the company drop the Almond Line if the company expects its sales to be $300,000? How about $400,000?
Transcribed Image Text:Lion Candies makes three types of chocolate candy bars. The head of marketing, Nathan Lord found the chart below and believes the company should drop the Almond line. He asks controller, Faye Martin, to review the situation and determine the fate of the Almond Line. Sales Variable Costs Fixed Costs Segment Income Solid Chocolate $ $ $ Crispy Chocolate $ 300,000 (100,000) $ (150,000) $ 50,000 $ Almond Chocolate 400,000 (250,000) (200,000) (50,000) 500,000 $ (150,000) $ (250,000) $ 100,000 $ If the Almond line is dropped, the sales of the other lines would be affected and the company would expect to experience a 10% drop in sales volume of Solid and Crispy Chocolate. In addition, the company's fixed costs would be reduced by 25%. Required: a. At what sales revenue & the Almond Line would the company be indifferent between keeping and dropping the product Line. b. Should the company drop the Almond Line if the company expects its sales to be $300,000? How about $400,000?
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