Discontinue Product Problem: RYT (aka RotYourTeeth) Candy Company
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discontinue_a_product_problem.docxDiscontinue a Product Problem
This Problem is worth 5% of your final grade.
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) |
