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Valdespin Company manufactures three sizos of camping tents-smal(S), medium (M), and large (.). The income statement has consistenty indicated a net loss for the M size, and management is considering three proposals: (1) continue Size M, (2) disoontinue Size M and reduce total output accordingly, or (3) discontinue Size M and conduct an advertising campaign to expand the sales of Size S so that the entire plant capacity can continue to be used If Proposal 2 is selected and Size M is disoontinued and production curtailed, the annual fixed production costs and fixed operating expenses could be reduced by $46,080 and $32,240, respectively. If Proposal 3 is selected, it is anticipated that an additional annual o pend ure of 34,560 for the ental of additional are o se space would yield an additional 130% in Size sales volume. It is also assumed that the increased production of Size S would utilize the plant facilities released by the disconinuance of Size M The sales and costs have been relatvely stable over the past few years, and they are expected to remain so for the foreseeable future. The income statement for the past year ended June 30, 20Y9, is as follows: Size S Size M ize L Total 5 66800000$737,300.00$956 36100$2361460.00 Sales Cost of goods sold 5300000 $3571200 $4517 60.00 $1.094380.0 Variable costs 4,88000138250.00172,800 003 85,93000 s Fxed costs 374880.00$495,370.00 $610,560.00 $1.480,81000 $880,65000 Total cost of goods sold , Gross profit 293,120.00$241.930.00 $345 500.00 t Operating expenses: Variable expenses 132,480.00$155,500.00 $195 840.00$483820.00

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