Coral Industries produces three products: Product X, Product Y and Product Z. In

Question

Coral Industries produces three products: Product X, Product Y and Product Z. Information for the products for the year is as follows: Product X Product Y Product Z Units produced and sold 5,000 9,000 12,000 Selling price per unit $22 $14 $25 Variable expenses per unit $16 $10 $19 The company's fixed costs totaled $82,000: $20,000 for Product X, $40,000 for Product Y and $22,000 for Product Z Should any product be dropped? Why or why not? Include supporting calculations Coral Industries produces three products: Product X, Product Y and Product Z. Information for the products for the year is as follows: Product X Product Y Product Z Units produced and sold 5,000 9,000 12,000 Selling price per unit $22 $14 $25 Variable expenses per unit $16 $10 $19 The company's fixed costs totaled $82,000: $20,000 for Product X, $40,000 for Product Y and $22,000 for Product Z Should any product be dropped? Why or why not? Include supporting calculations

Explanation / Answer

Analysis

Product Y should be dropped because this product incur net operating loss

Product X Product Y Product Z Sales 110000 126000 300000 Variable cost 80000 90000 228000 Contribution margin 30000 36000 72000 Fixed cost 20000 40000 22000 Net operating income 10000 -4000 50000

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