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Triple Threat Toys produces dolls, action fiqures and building sets. The accountants prepared a segmented...

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Accounting

Triple Threat Toys produces dolls, action fiqures and building sets. The accountants prepared a segmented contribution income statement for the three types of products manufacutured for the last year. The executive management team is concerned that the dolls segment has been showing a loss for the past few years.

Action Fiqures dolls Building Sets Total
Revenue 125000 200000 225000 550000
Less:Variable costs 76000 165000 165000 406000
contribution margin 49000 35000 60000 144000
less:Fixed costs 40000 40000 40000 120000
Income from operations 9000 5000 20000 24000

Recommed whether Triple Threat should keep or drop the dolls equipment product line based on the following independent scenarios .

A) If the line is dropped, assume that all fixed costs relating to the doll product line segment would remain with the company

b) Assume that the company would no longer incur all the fixed costs relating to the doll product segment if it drops the product line.

c) Assume that 10% of fixed costs related to the doll product segment would remain with the company if the product line dropped.

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