advise whether dishwashers should be dropped from the product range in order to impr 644144
Chris Gibson Kitchenware Limited sells kitchen appliances to department stores. Product costs are ascertained using an absorption costing system from which the following statement has been prepared in respect of the business’s three product lines.
|
|
Dishwashers £000s |
Fridges £000s |
Ovens £000s |
Total £000s |
|
|
Sales |
180 |
330 |
270 |
780 |
|
|
Less total costs |
(200) |
(250) |
(220) |
(670) |
|
|
Profit/(loss) |
(20) |
8 |
50 |
110 |
|
It has been estimated that costs are 60 per cent variable and 40 per cent fixed.
Required
(a) Restate the table distinguishing variable and fixed costs.
(b) Advise whether dishwashers should be dropped from the product range in order to improve profitability.