Question

Gator Corporation manufactures several types of accessories. For the year, the gloves and mittens line had sales of $480,000, variable expenses of $364,000, and fixed expenses of $150,000. Therefore, the gloves and mittens line had a net loss of $34,000. If Gator eliminates the line, $41,000 of fixed costs will remain. Prepare an analysis showing whether the company should eliminate the gloves and mittens line.

Answer 1

If 41,000 of costs will remain, it is more convenient to maintain the gloves and mittens line. It gives the possibility to keep working, maintain workers and try to make it to positive profit.

Step-by-step explanation:

Giving the following information:

Gator Corporation manufactures several types of accessories. For the year, the gloves and mittens line had sales of $480,000, variable expenses of $364,000, and fixed expenses of $150,000. Therefore, the gloves and mittens line had a net loss of $34,000. If Gator eliminates the line, $41,000 of fixed costs will remain.

Sales= 480,000

Variable expense= 364,000

Fixed expense= 150,000

Profit= -34,000

If 41,000 of costs will remain, it is more convenient to maintain the gloves and mittens line. It gives the possibility to keep working, maintain workers and try to make it to positive profit.