Top Managers of Technowares Manufacturing Are Alarmed by Their Operating

question 97

Essay

Top managers of Technowares Manufacturing are alarmed by their operating losses.They are considering dropping the desktop product line.The company accountants have prepared the following analysis to help make this decision.
Technowares Mantufacturing
Income Statement
For the Year Ended December 31,20XX $$\begin{array} { | l | r | r | r | } \hline & { \text { Total } } &{ \text { Laptop } } & \text { Desktop } \\\hline \text { Sales Revenue } & \$ 930,000 & \$ 575,000 & \$ 355,000 \\\hline \text { Variable Costs } & \underline { 507,000 } & \underline { 267,000 } & \underline { 240,000 } \\\hline \text { Contribution Margin } & 423,000 & 308,000 & 115,000 \\\hline \text { Fixed Costs: } & & & \\\hline \text { Manufacturing } & 375,000 & 225,000 & 150,000 \\\hline \text { Selling and Administrative } & \underline { 62,000 } & \underline { 45,000 } & \underline { 17,000 } \\\hline \text { Total Fixed Costs } & \underline { 437,000 } & \underline { 270,000 } & \underline { 167,000 } \\\hline \text { Operating Income (Loss) } & \underline { \$ ( 14,000 } & \underline { \$ 38,000 } & \underline { \$ 52,000 } \\\hline & & & \\\hline\end{array}$$ Total fixed manufacturing costs will not change if the company stops selling the desktop product line.The fixed selling and administrative costs,however,will be avoided.
Prepare a differential analysis to show whether Technowares Manufacturing should drop the desktop product line.Should the desktop product line be dropped? Explain your answer.

---

Definitions:

Fiduciary Capacity

A legal or ethical relationship of trust where one party, the fiduciary, acts in the best interest of another, typically in financial matters.

Independent Contractor

A person or entity contracted to perform work for another entity as a non-employee, typically responsible for their own taxes and benefits.

Physical Conduct

Refers to actions or behaviors that involve bodily movements or activities, often considered in legal contexts involving assault or bodily harm.

Collectively Bargain

The process in which workers, through their unions, negotiate with their employers regarding employment terms such as wages, hours, and working conditions.