Question 6
3 pts
MS Pottery has acquired Bowl Me Over and with it, an additional kiln that allows the new company, The Pottery, to produce enough of every product to meet market demand. Below is the financial information for The Pottery.
The Pottery Financial Information by Product
The Pottery | Mugs | Vases | Bowls
Sales | 1,125,000 | 1,800,000 | 1,200,000
Direct Materials | 84,375 | 120,000 | 144,000
Direct Labor | 450,000 | 600,000 | 400,000
Variable Overhead | 225,000 | 225,000 | 200,000
Fixed Overhead | 315,000 | 315,000 | 280,000
Cost of Goods Sold | 1,074,375 | 1,110,000 | 1,024,000
Variable selling expense (4% of sales dollars) | 45,000 | 72,000 | 48,000
Fixed selling expense | 28,125 | 15,000 | 20,000
Net Income | (22,500) | 603,000 | 112,000
The Pottery is considering discontinuing Mugs, as this product is losing money. Perform the calculations below to help The Pottery determine whether to discontinue Mugs.
Are the following costs Avoidable or Unavoidable?
The Pottery | Mugs | Avoidable or Unavoidable?
Sales | 1,125,000 | [ Select ]
Direct Materials | 84,375 | [ Select ]
Direct Labor | 450,000 | [ Select ]
Variable Overhead | 225,000 | [ Select ]
Fixed Overhead | 315,000 | [ Select ]
Cost of Good Sold | 1,074,375 | [ Select ]
Variable selling expense (4% of sales dollars) | 45,000 | [ Select ]
Fixed selling expense | 28,125 | [ Select ]
Net Income | (22,500)
What are the total sales for the Mug product? [ Select ]
What are the total Avoidable costs for the Mug product? [ Select ]
Would you recommend that The Pottery discontinue the Mug product? [ Select ]
