Question

Gator Corporation manufactures several types of accessories. For the year, the gloves and mittens line had sales of $489,000, variable expenses of $360,000, and fixed expenses of $140,000. Therefore, the gloves and mittens line had a net loss of $11,000. If Gator eliminates the line, $35,000 of fixed costs will remain. Prepare an analysis showing whether the company should eliminate the gloves and mittens line. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Continue Eliminate Net Income Increase (Decrease) Sales $ $ $ Variable costs Contribution margin Fixed costs Net income / (Loss) $ $ $ The analysis indicates that Gator should the gloves and mittens line.

Answer 1

Answer:

The analysis indicates that Gator should manufacture gloves and mittens otherwise loss will be increased by $24,900

Explanation:

Given Data:

sales = $489,000,

variable expenses = $360,000

fixed expenses = $140,000.  

                                   Continue      Eliminate           Net Income

                                                                                 Increase (Decrease)

Sales                           $489,000              0              -$489,000

Variable costs            $360,000              0               $360,000

Contribution margin    $129,900             0              -$129,900

Fixed costs                140,000            $35,000         $105,000

Net income                -$10,100           -$35,000     -$24,900

The analysis indicates that Gator should manufacture gloves and mittens otherwise loss will be increased by $24,900