(Scarce resource; discontinued product lines; negative contribution margin) The officers of Bardwell Company are reviewing the profitability of the company’s four products and the potential effects of several proposals for varying the product mix. The following is an excerpt from the income statement and other data.
Total
Product P
Product Q
Product R
Product S
Sales
$ 62,600
$10,000
$ 18,000
$ 12,600
$ 22,000
Cost of Goods Sold
(44,274)
(4,750)
(7,056)
(13,968)
(18,500)
Gross Profit
$ 18,326
$ 5,250
$ 10,944
$ (1,368)
$ 3,500
Operating expenses
(12,004)
(1,990)
(2,968)
(2,826)
(4,220)
Income before taxes
$ 6,322
$ 3,260
$ 7,976
$ (4,194)
$ (720)
Units sold
1,000
1,200
1,800
2,000
Sales price per unit
$10.00
$15.00
$7.00
$11.00
Variable cost of goods sold
2.50
3.00
6.50
6.00
Variable operating expenses
1.17
1.25
1.00
1.20
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