M7-7 Analyzing Keep-or-Drop Decision [LO 7-2, 7-5]Blowing Sand Company produces the Drafty model fan, which currently has a net loss of $45,000 as follows:Drafty Model$170,000119,000$ 51,00042,000$ 9,00054,000$ (45,000)Sales revenueLess: Variable costsContribution marginLess: Direct fixed costsSegment marginLess: Common fixed costsNet operating income (loss)Eliminating the Drafty product line would eliminate $42,000 of direct fixed costs. The $54,000 of common fixed costs would be redistributed to Blowing Sand's remaining productlines.Will Blowing Sand's net operating income increase or decrease if the Drafty model is eliminated? By how much?Total ProfitDecreasesby

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Asked Oct 21, 2019
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how would I find the difference between net operating income if the project is eliminated?

M7-7 Analyzing Keep-or-Drop Decision [LO 7-2, 7-5]
Blowing Sand Company produces the Drafty model fan, which currently has a net loss of $45,000 as follows:
Drafty Model
$170,000
119,000
$ 51,000
42,000
$ 9,000
54,000
$ (45,000)
Sales revenue
Less: Variable costs
Contribution margin
Less: Direct fixed costs
Segment margin
Less: Common fixed costs
Net operating income (loss)
Eliminating the Drafty product line would eliminate $42,000 of direct fixed costs. The $54,000 of common fixed costs would be redistributed to Blowing Sand's remaining product
lines.
Will Blowing Sand's net operating income increase or decrease if the Drafty model is eliminated? By how much?
Total Profit
Decreases
by
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M7-7 Analyzing Keep-or-Drop Decision [LO 7-2, 7-5] Blowing Sand Company produces the Drafty model fan, which currently has a net loss of $45,000 as follows: Drafty Model $170,000 119,000 $ 51,000 42,000 $ 9,000 54,000 $ (45,000) Sales revenue Less: Variable costs Contribution margin Less: Direct fixed costs Segment margin Less: Common fixed costs Net operating income (loss) Eliminating the Drafty product line would eliminate $42,000 of direct fixed costs. The $54,000 of common fixed costs would be redistributed to Blowing Sand's remaining product lines. Will Blowing Sand's net operating income increase or decrease if the Drafty model is eliminated? By how much? Total Profit Decreases by

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Keep or drop decision:

 

Keep or drop decision includes whether a company should keep a product line or drop a product line. It includ...

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