The Management Accountant for the Chocolate S'more Company Has Prepared

question 67

Essay

The management accountant for the Chocolate S'more Company has prepared the following income statement for the most current year:
$$\begin{array} { l r r r r } & \text { Chocolate } & \text { Chocolate Lite } & \text { Fudge } & \text { Total } \\\text { Sales } & \$ 40000 & \$ 25000 & \$ 35000 & \$ 100000 \\\text { Cost of goods sold } & 26000 & \underline { 15000 } & \underline { 19000 } & \underline { 60000 } \\\text { Contribution margin } & 14000 & 10000 & 16000 & 40000 \\\text { Delivery and ordering costs } & 2000 & 3000 & 2000 & 7000 \\\text { Rent (per sq. metre used) } & 3000 & 3000 & 2000 & 8000 \\\text { Allocated corporate costs } & 5000 & 5000 & 5000 & 15000 \\\text { Corporate profit } & \$ 4000 & \$ 1000 ) & \$ 7000 & \$ 10000\end{array}$$
a.Do you recommend discontinuing the Chocolate-Lite product line? Why or why not?
b.If the Chocolate product line had been discontinued,corporate profits for the current year would have decreased by what amount?

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Definitions:

Trust Agreement

A legal document that outlines the terms and conditions under which property is managed and held by a trustee for the benefit of another party.

Testamentary

Relating to or bequeathed through a will.

Charitable

Relating to or aimed at helping others through donations or volunteer work without the expectation of financial gain.

Intestate

The state of having died without a valid will.