DETERMINE whether RYT should discontinue a product line to increase profitability

Scenario:  RYT (aka RotYourTeeth) Candy Company sells lollipops.

Last year the company sold 10,000,000 lollipops for $1,000,000.

The Variable Costs were $350,000 and the Net Profits were $100,000

Administration has directed management to double profits in the next year.

ASSIGNMENT:  DETERMINE whether RYT should discontinue a product line to increase profitability.

RYT has been evaluating its various product lines and is specifically analyzing one location that produces three flavors:  Cherry, Lemon, and Blueberry.   Further analysis indicates that 20% of COGS is variable and 30% of Selling and Admin expenses are variable.  

 

Given the following data for the month of September, RYT is considering discontinuing the Blueberry flavor.  What would you advise?  Support your position.

                                      Cherry         Lemon      Blueberry

Sales                            $18,000        $26,000    $9,000

COGS                             7,000      12,000          4,000

Gross Profit                    11,000      14,000      5,000

Selling and Admin Exp      7,000      8,000       6,000

Net Income                       4,000      6,000       (1,000)

 

Show more >

Answer:

Learn more effectively and get better grades!

Do my homework