Bravo Baking Co has expanded its product line to include several other specialty breads. The operating results for the last quarter are provided below. Product Hi-Lo Whole Grain Fruit & Nuts Total
Revenues $67575 $31800 $15900 $115275
Variable prd costs$27030 $12720 $6360 $46110
Var. Sell & Admin. $13515 $6360 $3180 $23055
Contribution Margin$27030 $12720 $6360 $46110
Fixed Product Costs $5000 $5000 $5000 $15000
Fixed Sell & Admin. $5700 $2850 $2850 $11400
Allocated Common Cst$5000 $2500 $2500 $10000
Net Income $11330 $2370 -$3990 $9710
Required: Bravo wants to know the effect on Net Income if it decides to discontinue the Fruit & Nuts product.
If Bravo eliminates Fruit & Nuts 50% of fixed costs can be avoided.
Prepare and incremental analysis showing the Net Income Effect of eliminating the Fruit & Nuts product.
What woud you advise Bravo to do?
Using the Table below compute the Net Income for Bravo Baking after eliminating the Fruit & Nuts product.
Product Hi-Lo Whole Grain Fruit & Nuts Total
Revenues $67575 $31800 $0 $99375
Variable product costs $27030 $12720 $0 $39750
Variable Selling & Administrative costs $13515 $6360 $0 $19875
Contribution Margin $27030 $12720 $0 $39750
Fixed Product Costs $5000 $5000 $2500 $12500
Fixed Selling and Administrative Costs $5700 $2850 $1425 $9975
Allocated Common Costs $5000 $2500 $2500 $10000
Net Income $11330 $2370 -$6425 $7275

based on analysis what recommendation would you make about fruit and nuts?