Question

Sandhill Corporation manufactures several types of accessories. For the year, the gloves and mittens line had sales of $482,000, variable expenses of $365,000, and fixed expenses of $141,000. Therefore, the gloves and mittens line had a net loss of $24,000. If Sandhill eliminates the line, $44,000 of fixed costs will remain.

Prepare an analysis showing whether the company should eliminate the gloves and mittens line.

Answer 1

Sandhill should not not eliminate the Gloves and mitten line, as doing so would result in a net loss of ($20,000)

Step-by-step explanation:

To determine whether or not the company should eliminate the gloves and mitten , we will consider the following relevant cash flows for the decisions

Increment Analysis $

The lost contribution from elimination:

(482,000 - 365,000) (117,000 )

Savings in avoidable Fixed cost

(141,000- 44,000) 97000

Net income to be lost (20,000 )

The fixed of $44,000 would be incurred either way, so it is not relevant for this decision

Sandhill should not not eliminate the Gloves and mitten line, as doing so would result in a net loss of $20,000

Answer 2

Obviously, if the gloves and mittens line is eliminated net losses with an increase to 44,000 which shown an increase in losses by 20000. Therefore, this line should not be eliminated.

Step-by-step explanation:

from the Prepared analysis showing whether the company should eliminate the gloves and mittens line. its there for derived that this line should not be eliminated. because Obviously, if the gloves and mittens line is eliminated net losses with an increase to 44,000 which shown an increase in losses by 20000.

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