Question

Lisah, Inc., manufactures golf clubs in three models. For the year, the Big Bart line has a net loss of $10,000 from sales $200,000, variable costs $180,000, and fixed costs $30,000. If the Big Bart line is eliminated, $20,000 of fixed costs will remain. Prepare an analysis showing whether the Big Bart line should be eliminated. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Answer 1

Answer and Explanation:

Particulars Continue Discontinue Differential Effect on income

Sales $200,000 $0 -$200,000

variable cost $180,000 $0 $180,000

Contribution margin $20,000 $0 -$20,000

Fixed cost $30,000 $20,000 $10,000

Net income $-10,000 -$20,000 -$10,000

So the net financial disadvantage regarding elimination is $100,000