ACCT 346
Bravo Baking Co has expanded its product line to include several other specialty breads. The operating results for the last quarter are provided below.
Product Hi-Lo Whole Grain Fruit & Nuts Total
Revenues $67,575 $31,800 $15,900 $115,275
Variable product costs $27,030 $12,720 $6,360 $46,110
Variable Selling & Administrative costs $13,515 $6,360 $3,180 $23,055
Contribution Margin $27,030 $12,720 $6,360 $46,110
Fixed Product Costs $5,000 $5,000 $5,000 $15,000
Fixed Selling and Administrative Costs $5,700 $2,850 $2,850 $11,400
Allocated Common Costs $5,000 $2,500 $2,500 $10,000
Net Income $11,330 $2,370 -$3,990 $9,710
Required: Bravo wants to know the effect on Net Income if it decides to discontinue the Fruit & Nuts product.
If Bravo eliminates Fruit & Nuts 50% of fixed costs can be avoided.
Prepare and incremental analysis showing the Net Income Effect of eliminating the Fruit & Nuts product.
What woud you advise Bravo to do?
Using the Table below, compute the Net Income for Bravo Baking after eliminating the Fruit & Nuts product.
Product Hi-Lo Whole Grain Fruit & Nuts Total
Revenues 0
Variable product costs 0
Variable Selling & Administrative costs 0
Contribution Margin 0
Fixed Product Costs 0
Fixed Selling and Administrative Costs 0
Allocated Common Costs 0
Net Income 0