Question - Marinette Company makes several products, including canoes. The company has been experiencing losses from its canoe segment and is considering that product line. The following information is available regarding its canoe segment.
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MARINETTE COMPANY Income Statement - Canoe Segment
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Sales
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$2,040,000
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Variable costs
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Direct materials
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$430,000
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Direct labor
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540,000
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Variable overhead
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260,000
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Variable selling and administrative
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230,000
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Total variable costs
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1,460,000
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Contribution margin
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580,000
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Fixed costs
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Direct
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585,000
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Indirect
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380,000
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Total fixed costs
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365,000
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Net income
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$(385,000)
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1. If canoes are distributed, calculate the net income lost or gained.
2. Should management discontinue the manufacturing of canoes?