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7. Calc, Inc. owns a machine that produces baskets for the gift packages the company...

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Accounting

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7. Calc, Inc. owns a machine that produces baskets for the gift packages the company sells. The company uses 900 baskets in production each month. The costs of making one basket is $4 for direct materials, $3 for variable manufacturing overhead, $2 for direct labor, and $5 for fixed manufacturing overhead. The unit cost is based on the monthly production of 900 baskets. The company determined that 30% of the fixed manufacturing overhead is avoidable. An outside supplier has offered to sell Calc the baskets for $13 each, and can supply all the units it needs. Instructions supplier 8. Keith Inc. has 4 product lines: sour cream, ice cream, yogurt, and butter. Demand of is not affected by changes in other product lines, 30% of the fixed individual product costs are direct, and the other 70% are allocated. Results of June follow: Ice Cresanm 400 Butter Total 2,000 500 200 3,100 Units sold Revenue Variable departmental costs Fixed costs Net income (loss) $10,000 $20,000 $10,000 S20,000 $60,000 4,800 28,000 6,000 13,000 4,200 5000 2,000 3,000 7,00017,000 $.01000) 5.000 2.800 S 8.200 $15.000 Instructions Prepare an incremental analysis of the effect of dropping the sour cream product line

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