Licuado juice company has four product lines : orange, tamato,carrot, and grape

Question

Licuado juice company has four product lines : orange, tamato,carrot, and grape

shown below is last year's income statement segmented by product line.

net operating income last year for licuda company as a whole was $24800

1, if the carrot product line would havebeen dropped at the beginning of last year, how would this have changed the net operating income of licuado as a whole? a)3000 decreases

2.licuado is considering the implementation of a 5000 advertising program specifically targeted at one of the four product lines. the program isexpected to increase sales for any one of the product lines by 12000.if the goal is to maximize the company's net operating income, for which product line should licuado implement the advertising program?

plz explain

orange tomato carrot grape sales 60000 32000 24000 44000 variable expense 22800 11200 12000 17600 contribution margin 37200 20800 12000 26400 traceable fixed expense 12000 8000 9000 26400 segment margin 25200 12800 3000 19800

Explanation / Answer

a)Net income of licuado as a whole will decrease by =$ 3000

b)

since Traceable fixed cost remain same whether program is implemented or not so we take decision on the basis of contribution margin ratio

so product Tomato should implement such program as it has highest contribution margin ratio .

orange Tomato carrot grape Contribution margin ratio = contribution /sales 37200 / 60000 20800/32000 12000/ 24000 26400/44000 = .62 or 62% = .65 or 65% .50 or 50% .60 or 60%

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