Maurice Tutor

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    Argosy University/ Phoniex University/
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Category > Management Posted 06 May 2018 My Price 9.00

Woodchuck Corp.

Analyzing a Keep-or-Drop Decision Woodchuck Corp. considering eliminating a product from its line of outdoor tables. Two products, the Oak-A and Fiesta tables, have impressive sales. However, sales for the Studio model have been dismal. Information related to Woodchuck’s outdoor table line follows

Woodchuck has determined that eliminating the Studio model will cause sales of the Oak-A and the Fiesta tables to increase by 20 percent and 5 percent, respectively. Variable costs for these two models will increase proportionately. Additionally, $1,000 of the fixed cost allocated to the Studio model is avoidable. The remaining fixed overhead currently allocated to the Studio model will be redistributed to the remaining two products.

Required:

1. Determine what will happen to the company’s total profit, if Woodchuck drops the Studio product. What is your recommendation to Woodchuck?

2. Suppose that $4,000 of fixed overhead allocated to the Studio model is avoidable. Would your recommendation to Woodchuck change? Why or why not?

Answers

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Status NEW Posted 06 May 2018 07:05 PM My Price 9.00

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