The Mansfield Company manufactures and sells two lines of fishing rods. During the most recent...
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Accounting
The Mansfield Company manufactures and sells two lines of fishing rods. During the most recent accounting period, the Pro line and the Novice line sold 15,000 and 2,000 units, respectively. The company's most recent financial statements are shown below:
| Pro | Novice | ||||||
| Sales | $ | 900,000 | $ | 240,000 | |||
| Less cost of goods sold: | |||||||
| Unit-level production cost | 600,000 | 135,000 | |||||
| Depreciation, production equipment | 125,000 | 50,000 | |||||
| Gross margin | $ | 175,000 | $ | 55,000 | |||
| Less operating expenses: | |||||||
| Unit-level selling and administrative costs | 40,000 | 65,000 | |||||
| Corporate-level facility expenses (fixed) | 36,000 | 36,000 | |||||
| Net income (loss) | $ | 99,000 | $ | (46,000 | ) | ||
Based on this information, the company should:
Multiple Choice
Eliminate the Novice line because it is operating at a loss.
Keep the Novice line because it contributes $40,000 to total profitability.
Keep the Novice line because it contributes $55,000 to total profitability.
It is impossible to determine with the given information.
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