Coronado Industries has three product lines. Its only unprofitable line is Corn Nuts, the results of which appear below for 2019:

Sales $1500000

Variable expenses 1010000

Fixed expenses 600000

Net loss$ (110000)

If this product line is eliminated, 30% of the fixed expenses can be eliminated. How much are the relevant costs in the decision to eliminate this product line?

Question

Business

Zion Pena

22 May, 22:36

Coronado Industries has three product lines. Its only unprofitable line is Corn Nuts, the results of which appear below for 2019:

Sales $1500000

Variable expenses 1010000

Fixed expenses 600000

Net loss$ (110000)

If this product line is eliminated, 30% of the fixed expenses can be eliminated. How much are the relevant costs in the decision to eliminate this product line?

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Answers (1)

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Korbin Cummings · Answer 1

Relevant costs = 1,190,000

Explanation:

Giving the following information:

Variable expenses 1010000

Fixed expenses 600,000

If this product line is eliminated, 30% of the fixed expenses can be eliminated.

The only relevant costs are the variable cost and the avoidable fixed cost.

Variable cost = 1,010,000

Fixed costs = 600,000*0.3 = 180,000

Relevant costs = 1,190,000