Question

Vaughn Manufacturing has three product lines. Its only unprofitable line is Corn Nuts, the results of which appear below for 2019:Sales$1530000Variable expenses1040000Fixed expenses600000Net loss$ (110000)If this product line is eliminated, 30% of the fixed expenses can be eliminated. How much are the relevant costs in the decision to eliminate this product line

Answer 1

Answer: The relevant costs are $18000 in the decision to eliminate this product line.

Explanation:

Since we have given that

Sales = $1530000

Variable expenses = $1040000

Fixed expenses = $600000

Net loss = $110000

If product line is eliminated, 30% of the fixed expenses can be eliminated.

So, it becomes,

30% of $600000 is given by

`0.3* 600000\\\\=\$18000`

Hence, the relevant costs are $18000 in the decision to eliminate this product line.