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XYZ has been experiencing losses on its Widget line for several years. Here is the...

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Accounting

XYZ has been experiencing losses on its Widget line for several years. Here is the most recent contribution margin statement:

Sales 850,000
VC:
Variable Manufacturing 330,000
Sales Commissions 42,000
Shipping 18,000
Total VC 390,000
Contribution Margin 460,000
FC:
Advertising (traceable) 270,000
Depreciation (no resale) 80,000
General Factory OH 105,000
Product Manger Salary 32,000
Insurance on Inventory 8,000
Purchasing Department 45,000
Total FC 540,000
Net Op Loss (80,000)

The general factory overhead is a common cost allocated on the basis of machine hours

The Purchasing department is a common cost allocated on the basis of sales dollars.

Insurance is on manufactured inventory, purchased inventory will be just in time.

How much will profits change if this line is dropped?

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