Blowing Sand company produces the drafty model fan, which currently has a net lo
ID: 2554921 • Letter: B
Question
Blowing Sand company produces the drafty model fan, which currently has a net loss of $45,000 as follows
o Mail ja C MSI Ha C Cordov M Mathway C | ? ezto.mheducation.com/hm.tpx Visitedmy.utrgv.edu ALGEBRA @ Login Search everything on..- . . Blowing Sand Company produces the Drafty model fan, which currently has a net lossof $45,000 as follows Drafty Modeli $170,000 119,000 S 51,000 42,000 $ 9,000 54,000 S (45,000) Sales revenue Less: Variable costs Contribution margin Segment margin Net operating income (loss) Less: Direct fixed costs Less: Common fixed costs Eliminating the Drafty product line would eliminate $42,000 of direct fixed costs. The S54,000 of common fixed costs would be redistributed to Blowing Sand's remaining product lines Will Blowing Sand's net operating income increase or decrease if the Drafty model is eliminated? By how much? byExplanation / Answer
Blowing Sand's net operating income will decrease by $9,000 ($54,000 - $45,000).
Drafty Model Eleminating the Drafty Model Sales revenue $170,000 0 Less: Variable costs 119,000 0 Contribution margin $51,000 0 Less: Direct Fixed costs 42,000 0 Segment margin $9,000 0 Less: common fixed costs 54,000 54,000 Net operating income (loss) $(45,000) $(54,000)