Hickory Company’s three wooden flooring product

Hickory Company’s three wooden flooring product

Click Link Below To Buy:

http://hwcampus.com/shop/hickory-companys-three-wooden-flooring-product/

Contact Us:

Hwcoursehelp@gmail.com

Shown below is a segmented income statement for Hickory Company's three wooden flooring product lines:

Strip                Plank              Parquet          Total

Sales Revenue                       $440,000       $200,000       $300,000       $900,000

Less: Variable Exps               225,000         120,000         250,000         595,000

Contribution Margin 175,000         80,000 50,000 305,000

Less direct fixed expenses:

Machine rent                         (5,000)           (20,000)        (50,000)        (75,000)

Supervision                            (15,000)        (10,000)        (20,000)        (45,000)

Depreciation                          (35,000)        (10,000)        (25,000)        (70,000)

Segment margin                    $120,000       40,000 (45,000)        115,000

Hickory's management is deciding whether to keep or drop the parquet product line. Hickory's parquet flooring product line has a contribution margin of $50,000 (sales of $300,000 less total variable costs of $250,000). All variable costs are relevant. Relevant fixed costs associated with this line include 80% of parquet's machine rent and all of parquet's supervision salaries.

1. Which alternative is more cost effective? Drop the parquet flooring line.

2. By how much? $____?