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

question 175

Essay

The management accountant for the Chocolate S'more Company has prepared the following income statement for the most current year:
$\begin{array}{lrrrr}&\text { Chocolate }&\text { other Candy }&\text { Fudge }&\text { Total }\\\text { Sales } & \$ 40,000 & \$ 25,000 & \$ 35,000 & \$ 100,000 \\\text { Cost of goods sold } & 26,000 & 15,000 & 19,000 & 60,000 \\\text { Contribution margin } & 14,000 & 10,000 & 16,000 & 40,000 \\\text { Delivery and ordering costs } & 2,000 & 3,000 & 2,000 & 7,000\\\text { Rent (per sq. foot used) } & 3,000 & 3,000 & 2,000 & 8,000 \\\text { Allocated corporate costs } & 5,000 & 5,000 & 5,000 & 15,000 \\\text { Corporate profit } & \$ 4,000 & \$(1,000) & \$ 7,000 & \$ 10,000\end{array}$ a.Do you recommend discontinuing the Other Candy 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:

List Price

The manufacturer's suggested retail price of a product before any discounts or allowances are taken into account.

Fair Value

Fair Value is the estimated market price of an asset or liability, reflecting what a willing buyer would pay a willing seller in an arm's length transaction.

Nonmonetary Productive Assets

Physical or tangible assets that do not have a fixed monetary value but contribute to the production capacity of a business.

Boot

Additional cash or property added to an exchange or trade to make the value of the traded goods equal, commonly used in real estate and barter transactions.