Segmented Income Statements, Product-Line Analysis
Bismarck Company produces blenders and coffeemakers. During the past year, the company produced and sold 80,000 blenders and 75,000 coffeemakers. Fixed costs for Bismarck totaled $327,000, of which $92,400 can be avoided if the blenders are not produced and $145,000 can be avoided if the coffee makers are not produced. Revenue and variable cost information follow:
Blenders Coffee Makers
Variable expenses per appliance $20 $27
Selling price per appliance 24 29
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2a.What would the effect be on Bismarck’s profit if the coffeemaker line is dropped?
The profits will
SelectIncreaseDecreaseCorrect 1 of Item 2
by $
2b.What would the effect be on Bismarck’s profit if the blender line is dropped?
The profits will
SelectIncreaseDecreaseCorrect 3 of Item 2
by $
3.What would the effect be on firm profits if an additional 10,000 blenders could be produced (using existing capacity) and sold for $21.50 on a special-order basis? Existing sales would be unaffected by the special order.
The profits will
SelectIncreaseDecreaseCorrect 5 of Item 2
by $