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Scenario: RYT (aka RotYourTeeth) Candy Company sells lollipops.
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 |
$1 |
8,000 |
$2 |
6,000 |
$9,000 |
|
|
7,000 |
12,000 |
4,000 |
||||
|
Gross Profit |
11,000 |
14,000 |
5,000 |
|||
|
Selling and Admin Exp |
||||||
|
Net Income |
(1,000) |
