Bonita Industries produces three versions of baseball bats: wood, aluminum, and

Question

Bonita Industries produces three versions of baseball bats: wood, aluminum, and hard rubber. A condensed segmented income statement for a recent period follows:

$150000

$ 25000

$(15000)

$160000

Assume none of the fixed expenses for the hard rubber line are avoidable. What will be total net income if the line is dropped?

Wood Aluminum Hard Rubber Total Sales $590000 $280000 $65000 $935000 Variable expenses 365000 220000 58000 643000 Contribution margin 225000 60000 7000 292000 Fixed expenses 75000 35000 22000 132000 Net income (loss)

$150000

$ 25000

$(15000)

$160000

Explanation / Answer

total net income if the line is dropped=Net income for wood+Net income for aluminium-Fixed cost for Hard Rubber

which is equal to

=(150,000+25000-22000)

=$153000.

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