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QUESTION 4: Kanuti Company Ltd Manufacture three types of Cars-AeroCar, Boafo and Nanteyie. Data on...

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Question

Accounting

QUESTION 4:

Kanuti Company Ltd Manufacture three types of Cars-AeroCar, Boafo and Nanteyie. Data on Sales and Expenses for the past year are given below:

Details

Total N$

AeroCar

Boafo

Nanteyie

Sales

1000

140

500

360

Less Variable Expenses

410

60

200

150

Contribution

590

80

300

210

Less Fixed Cost

Advertising- tractability

216

41

110

65

Depreciation special equipment

95

20

40

35

Salaries-Line Managers

19

6

7

6

General factors fixed costs

200

28

100

72

Total fixed Costs

530

95

257

178

Net Operating Income

60

(15)

43

32

Additional Informations

The general factory fixed cost and depreciation were allocated on the bases off sales. The management is concerned about the continuous losses shown by Aerocar division and want a recommendation on whether or not the line should be discontinued. If the AeroCar line is dropped the two line managers would be discharged of their duties

Required:

Determine whether production and sales of should be discontinued

Answer & Explanation Solved by verified expert
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