Vogel Co. produces three models of heating and air conditioning thermostat compo

Question

Vogel Co. produces three models of heating and air conditioning thermostat components. The following table summarizes data about each model:

(a)

On what basis does the $30,000 of company fixed expenses appear to be allocated?

(b)

Calculate the effect on total company net income if the MV12 model were discontinued. (Omit the "$" sign in your response.)

BV19 HV41 MV12 Selling price per unit $ 36 $ 60 $ 30 Contribution margin per unit 12 18 6 Units sold per month 4,000 2,000 6,000 Total contribution margin $ 48,000 $ 36,000 $ 36,000 Direct fixed expenses 21,600 17,100 24,300 Segment margin $ 26,400 $ 18,900 $ 11,700 Allocated company fixed expenses 10,000 5,000 15,000 Operating income (loss) $ 16,400 $ 13,900 $ (3,300 )

Explanation / Answer

Ok. Based on your request: (b) Sorry there is an error in my previous post: Total contribution margin of BV19 and HV41 = 48000+36000 =$84000 Total direct fixed expenses = 21600 + 17100 = $38700 Total Allocated company fixed expenses = $30000 Net income = 84000 - 38700 - 30000 = 15300 Before discontinued net income = 16400 + 13900 - 3300 = 27000 After discontinued net income = 15300 Thus, net income will decrease 27000 - 15300 = 11700 if discontinue MV12 Hope this helps!

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