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Lisah, Inc., manufactures golf clubs in three models. For the year, the Big Bart line has a net loss of $5,600 from sales $200,000, variable costs $175,000, and fixed costs $30,600. If the Big Bart line is eliminated, $19,600 of fixed costs will remain. Prepare an analysis showing whether the Big Bart line should be eliminated. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

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Answer:

                                   Continue    Eliminate   N.I. Increase/(Decrease)

Sales                           $200,000       $0                ($200,000)

- Variable Costs          $175,000          $0                $175,000

Contribution margin   $25,000           $0                ($25,000)

- Fixed Cost                 $30,600      $19,600            $11,000

Net Income (Loss)      ($5,600)       ($19,600)          ($14,000)

Conclusion: The production line should be Continued, because eliminating the production line would lead to a further Decrease in Net Income by $14,000,

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