Question

Blossom Trivia Co. manufactures and sells two trivia products, the Square Trivia Game and the Round Trivia Game. Last quarter’s operating profits, by product, and for the company as a whole, were as follows: Square Round Total Sales revenue $17,800 $6,620 $24,420 Variable expenses 4,520 2,900 7,420 Contribution margin 13,280 3,720 17,000 Fixed expenses 2,900 4,200 7,100 Operating income $ 10,380 $(480 ) $ 9,900 Forty percent of the Round Game’s fixed costs could have been avoided if the game had not been produced or sold. If the Round Game had been discontinued before the last quarter, what would operating income have been for the company as a whole?

Answer 1

Operating income $ 7860 if the Round Trivia Game had not been produced or sold.

Step-by-step explanation:

Blossom Trivia Co. Manufacturers

Square Trivia Game Round Trivia Game Total

Sales revenue $17,800 $6,620 $24,420

Variable expenses 4,520 2,900 7,420

Contribution margin 13,280 3,720 17,000

Fixed expenses 2,900 4,200 7,100

Operating income $ 10,380 $(480 ) $ 9,900

40% of Round Game fixed Costs= 40 % of 4,200= $1680

Unavoidable fixed costs= 4200- 1680= $ 2520

Adding these unavoidable fixed costs to the Square Trivia Game would give the company an operating income of $ 7860

Blossom Trivia Co. Manufacturers

Square Trivia Game

Sales revenue $17,800

Variable expenses 4,520

Contribution margin 13,280

Fixed expenses 2,900 + 2520= $ 5420

Operating income $ 7860