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16 November, 03:17

Blossom Trivia Co. manufactures and sells two trivia products, the Square Trivia Game and the Round Trivia Game. Last quarter's operating profits, by product, and for the company as a whole, were as follows: Square Round Total Sales revenue $17,800 $6,620 $24,420 Variable expenses 4,520 2,900 7,420 Contribution margin 13,280 3,720 17,000 Fixed expenses 2,900 4,200 7,100 Operating income $ 10,380 $ (480) $ 9,900 Forty percent of the Round Game's fixed costs could have been avoided if the game had not been produced or sold. If the Round Game had been discontinued before the last quarter, what would operating income have been for the company as a whole?

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  1. 16 November, 05:08
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    Operating income $ 7860 if the Round Trivia Game had not been produced or sold.

    Explanation:

    Blossom Trivia Co. Manufacturers

    Square Trivia Game Round Trivia Game Total

    Sales revenue $17,800 $6,620 $24,420

    Variable expenses 4,520 2,900 7,420

    Contribution margin 13,280 3,720 17,000

    Fixed expenses 2,900 4,200 7,100

    Operating income $ 10,380 $ (480) $ 9,900

    40% of Round Game fixed Costs = 40 % of 4,200 = $1680

    Unavoidable fixed costs = 4200 - 1680 = $ 2520

    Adding these unavoidable fixed costs to the Square Trivia Game would give the company an operating income of $ 7860

    Blossom Trivia Co. Manufacturers

    Square Trivia Game

    Sales revenue $17,800

    Variable expenses 4,520

    Contribution margin 13,280

    Fixed expenses 2,900 + 2520 = $ 5420

    Operating income $ 7860
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