Question - The officers of Bradshaw Company are reviewing the profitability of the company's four products and the potential effect of several proposals for varying the product mix. An excerpt from the income statement and other data follow:
|
Particulars
|
Total
|
Product
|
|
P
|
Q
|
R
|
S
|
|
Sales
|
$ 62,600
|
$ 10,000
|
$ 18,000
|
$ 12,600
|
$ 22,000
|
|
Cost of goods sold
|
44,247
|
4,750
|
7,056
|
13,968
|
18,500
|
|
Gross profit
|
18,326
|
5,250
|
10,944
|
(1,368)
|
3,500
|
|
Operating expenses
|
12,012
|
1,990
|
2,976
|
2,826
|
4,220
|
|
Income before income taxes
|
6,314
|
3,260
|
7,968
|
(4,194)
|
(720)
|
|
Units sold
|
|
1,000
|
1,200
|
1,800
|
2,000
|
|
Sales price per unit
|
|
10.00
|
15.00
|
7.00
|
11.00
|
|
Per unit Variable cost of goods sold
|
|
2.50
|
3.00
|
6.50
|
6.00
|
|
Per unit Variable operating expenses per unit
|
|
1.17
|
1.25
|
1.00
|
1.20
|
1. What is the effect on the company's income if Product R is discontinued (increase/decrease in dollars)?
2. What is the effect on the company's income if the sales price of Product R is increased to $8 per unity with a decrease in the number o units sold to 1500 (increase/decrease in dollars)?