help in homework

New User?

Fill This Form To Receive Instant Help

Help in Homework
trustpilot ratings
google ratings


Homework answers / question archive / A net loss of $60,000 was reported for Buzz Lightyear if the Asteroid Manufacturing Company for the past year

A net loss of $60,000 was reported for Buzz Lightyear if the Asteroid Manufacturing Company for the past year

Marketing

A net loss of $60,000 was reported for Buzz Lightyear if the Asteroid Manufacturing Company for the past year. This loss was computed as follows:

 

Sales $300,000
Variable costs (120,000)
Fxed costs (240,000)
Net Loss (60,000)

 

Because of the loss, Asteroid is considering discounting Buzz Lightyear. The managerial accountant estimates that 60% of Buzz Lightyear's fixed costs are avoidable and 40% are unavoidable. Should Asteroid discontinue the Buzz Lightyear line? Why or why not?

pur-new-sol

Purchase A New Answer

Custom new solution created by our subject matter experts

GET A QUOTE

Answer Preview

To decide whether Asteroid should discontinue the Buzz Lightyear line, the unavoidable fixed costs should be less than the current net loss reported.

 

Fixed costs $240,000
Percentage unavoidable 40%
Unavoidable fixed costs $96,000
Net loss $60,000
Difference $36,000

The Buzz Lightyear line should not be discontinued because if they discontinue the line, it will incur them an additional loss of $36,000 as compared to continuing the line.

If the line is discontinued, the unavoidable fixed costs will be the only cost remaining, thus would be their net loss because they will not incur sales and variable costs.

Sitejabber (5.0)

BBC (5.0)

Trustpilot (4.9)

Google (5.0)

Related Questions