Question

Quaker is considering discontinuing coco crispies given following info:On income statement: Sales

Rev. 5,300,000

Less: Cost of Goods Sold 6,400,000

Gross Profit (1,100,000)

Less: Operating Expenses 1,550,000

Operating income (loss) (2,650,000)

Along w/ following info: Fixed manufacturing overhead costs account for​ 40% of the cost of​ goods, while only​ 30% of the operating expenses are fixed. Since the coco crispies

line is just one of the​ company’s cereal operations, only $775,000 of direct fixed costs​ (the majority of which is​ advertising) will be eliminated if the product line is discontinued. The remainder of the fixed costs will still be incurred by the company.

Begin by preparing a contribution margin income statement for coco crispies product line

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