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Cornell Enterprises currently produces several products. Model L78 is showing a net operating loss as indicated by the following condensed income statement prepared for the year ended December 31. You have been hired by Cornell Enterprises to help analyze the decision as to whether to eliminate Model L78. Upon investigation, you discover that if Model L78 is eliminated, $20,000 of the fixed costs shown on the above condensed income statement can be eliminated. The rest of the fixed costs allocated to Model L78 are common fixed costs that will be allocated to the remaining two products produced by Cornell Enterprises. Determine if Cornell Enterprises should discontinue Model L78.

Cornell Enterprises currently produces several products. Model L78 is showing a net operating loss as indicated by the following condensed income statement prepared for the year ended December 31. You have been hired by Cornell Enterprises to help analyze the decision as to whether to eliminate Model L78. Upon investigation, you discover that if Model L78 is eliminated, $20,000 of the fixed costs shown on the above condensed income statement can be eliminated. The rest of the fixed costs allocated to Model L78 are common fixed costs that will be allocated to the remaining two products produced by Cornell Enterprises. Determine if Cornell Enterprises should discontinue Model L78.

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter2: Job Order Costing
Section: Chapter Questions
Problem 6BE: Cost of goods sold Pine Creek Company completed 200,000 units during the year at a cost of...
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Cornell Enterprises currently produces several products. Model L78 is showing a net operating loss as indicated by the following condensed income statement prepared for the year ended December 31.

You have been hired by Cornell Enterprises to help analyze the decision as to whether to eliminate Model L78. Upon investigation, you discover that if Model L78 is eliminated, $20,000 of the fixed costs shown on the above condensed income statement can be eliminated. The rest of the fixed costs allocated to Model L78 are common fixed costs that will be allocated to the remaining two products produced by Cornell Enterprises.

Determine if Cornell Enterprises should discontinue Model L78.

 

Cornell Enterprises Model L78 Condensed Income Statement For the Year Ended December 31 Sales (1,500 units at $320) Variable costs (1,500 units at $240) Contribution margin $480,000 $360,000 $120,000 Fixed costs $125,000 $(5.000) Operating loss
Transcribed Image Text:Cornell Enterprises Model L78 Condensed Income Statement For the Year Ended December 31 Sales (1,500 units at $320) Variable costs (1,500 units at $240) Contribution margin $480,000 $360,000 $120,000 Fixed costs $125,000 $(5.000) Operating loss
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