what is the effect on travesty s operating profit if it drops the porcelain product 592961

(Keep or Drop a Product Line) Travesty Stores are considering deleting its porcelain product due to losses being experienced. Travesty’s summary profit report shows the following:

Cutlery

Glassware

Porcelain

Total

Sales

$30,000

$35,000

$10,000

$75,000

Variable costs

15,000

20,000

7,000

42,000

Avoidable product-related fixed costs

5,000

7,500

2,500

15,000

Allocated corporate fixed costs

5,000

5,833

1,667

12,500

Operating profit

S 5,000

$ (1,667)

S(1,167)

$ 5,500

What allocation basis is the company using to allocate the corporate fixed costs?
What is the effect on Travesty’s operating profit if it drops the porcelain product line?
If the allocated corporate fixed costs could be decreased by 25% overall, would this change the decision in (a)? Show calculations.

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