Last year the company sold 10,000,000 lollipops for $1,000,000.
The Variable Costs were $350,000 and the Net Profits were $100,000
Administration has directed management to double profits in the next year.
ASSIGNMENT: DETERMINE whether RYT should discontinue a product line to
increase profitability.
RYT has been evaluating its various product lines and is specifically analyzing one
location that produces three flavors: Cherry, Lemon, and Blueberry. Further analysis
indicates that 20% of COGS is variable and 30% of Selling and Admin expenses are
variable.
Given the following data for the month of September, RYT is considering discontinuing
the Blueberry flavor. What would you advise? Support your position. Sales
COGS
Gross Profit
Selling and Admin Exp
Net Income Cherry
$18,000
7,000
11,000
7,000
4,000 Lemon
$26,000
12,000
14,000
8,000
6,000 Blueberry
$9,000
4,000
5,000
6,000
(1,000)