ACCT 1220 Lecture 7: Unit 07; Internal Control & Cash; Controlling, Reporting, Managing
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28 Jun 2017
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3. Totally Technology manufactures Cameras and Video Recorders.The company's product line income statement follows:
Camera | Video Recorder | Total | |
Sales revenue | $300,000 | $100,000 | $400,000 |
Cost of goods sold | |||
Variable | $75,000 | $49,000 | $124,000 |
Fixed | $82,000 | $28,000 | $110,000 |
Total cost of goods sold | $157,000 | $77,000 | $234,000 |
Gross profit | $143,000 | $23,000 | $166,000 |
Marketing and administrativeexpenses | |||
Variable | $25,000 | $28,000 | $53,000 |
Fixed | $32,000 | $19,000 | $51,000 |
Total marketing andadministrative expenses | $57,000 | $47,000 | $104,000 |
Operating income (loss) | $86,000 | (24,000) | $62,000 |
Management is considering discontinuing the Video Recorderproduct line. Accountants for the company estimate thatdiscontinuing the Video Recorder line will decrease fixed cost ofgoods sold by $10,000 and fixed marketing and administrativeexpenses by $4,000.Prepare an analysis supporting your opinionabout whether or not the Video Recorder product line should bediscontinued.