Quaker is considering discontinuing coco crispies given following info:On income statement: Sales
Less: Cost of Goods Sold 6,400,000
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Gross Profit (1,100,000)
Less: Operating Expenses 1,550,000
Operating income (loss) (2,650,000)
Along w/ following info: Fixed manufacturing overhead costs account for 40% of the cost of goods, while only 30% of the operating expenses are fixed. Since the coco crispies
line is just one of the company’s cereal operations, only $775,000 of direct fixed costs (the majority of which is advertising) will be eliminated if the product line is discontinued. The remainder of the fixed costs will still be incurred by the company.
Begin by preparing a contribution margin income statement for coco crispies product line