CoursHeroTranscribedText: LuKe corporation produces a variety or products, each wrthrn their own lelSlOl'l. Last year,...
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CoursHeroTranscribedText: LuKe corporation produces a variety or products, each wrthrn their own lelSlOl'l. Last year, the managers at Luke developed and began marketing a new chewing gum, Bubbs, to sell in vending machines. The product, which sells for $5.35 per case, has not had the market success that managers expected and the company is considering dropping Bubbs. The product-line income statement for the past 12 months follows: Revenue $ 14,685,150 Costs Manufacturing costs $ 14,441,395 Allocated corporate costs (@5%) 734,258 15,175,653 Productline margin $ (490,503) Allowance for tax (@20%) 98.100 Productline profit (1055) $ (392.403) All products at Luke receive an allocation of corporate overhead costs, which is computed as 5 percent of product revenue. The 5 percent rate is computed based on the most recent year's corporate cost as a percentage of revenue. Data on corporate costs and revenues for the past two years follow: Corporate Revenue Corporate Overhead Costs Most recent year $ 108,750,000 $ 5,437,500 Previous year 76,400,000 4,703,155
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