Question - Brislin Company makes and sells two products, Olives and Popeyes. The income statement for the prior year, 2001, was as follows:
|
Olives
|
Popeyes
|
|
Sales
|
$16,000
|
$24,000
|
|
Variable cost of goods sold
|
6,000
|
10,000
|
|
Manufacturing contribution margin
|
$10,000
|
$14,000
|
|
Fixed production
|
5,000
|
7,000
|
|
Variable selling and administration
|
2,000
|
5,000
|
|
Fixed selling and administration
|
1,000
|
3,000
|
|
Net income
|
$2,000
|
($1,000)
|
Brislin's fixed costs are unavoidable and are allocated to products on the basis of sales revenue. If Popeyes are dropped, sales of Olives are expected to increase by 40 percent next year. What is the best decision of the company?