Question

Gator Corporation manufactures several types of accessories. For the year, the gloves and mittens line had sales of $489,000, variable expenses of $360,000, and fixed expenses of $140,000. Therefore, the gloves and mittens line had a net loss of $11,000. If Gator eliminates the line, $35,000 of fixed costs will remain. Prepare an analysis showing whether the company should eliminate the gloves and mittens line. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Continue Eliminate Net Income Increase (Decrease) Sales $ $ $ Variable costs Contribution margin Fixed costs Net income / (Loss) $ $ $ The analysis indicates that Gator should the gloves and mittens line.

Answer 1

The analysis indicates that Gator should manufacture gloves and mittens otherwise loss will be increased by $24,900

Step-by-step explanation:

Given Data:

sales = $489,000,

variable expenses = $360,000

fixed expenses = $140,000.

Continue Eliminate Net Income

Increase (Decrease)

Sales $489,000 0 -$489,000

Variable costs $360,000 0 $360,000

Contribution margin $129,900 0 -$129,900

Fixed costs 140,000 $35,000 $105,000

Net income -$10,100 -$35,000 -$24,900

The analysis indicates that Gator should manufacture gloves and mittens otherwise loss will be increased by $24,900