Nellie Tompkins Is the Owner and Operator of Hot Mamma

Essay

Nellie Tompkins is the owner and operator of Hot Mamma Salsa,which she sells at craft festivals.She only makes and sells three types of salsa--peach,pear,and pineapple salsa.The joint costs of leasing her professional kitchen for manufacturing,travel to craft shows,insurance,and so on are allocated on an equal basis to the three types of salsas sold.Last year's sales figures and allocated joint costs follow.Should Hot Mamma Salsa stop selling its pear salsa? Why or why not?
$\begin{array}{lccc}& \underline{\text { Pear Salsa} } & \underline{ \text { Peach Salsa }} & \underline{ \text { Pineapple Salsa} } \\\text { Sales}&\$4,000&\$8,000&\$9,000\\\text { Less: Cost of goods sold}& \underline{5,000} & \underline {5,000}& \underline{5,000} \\\text { Gross margin}&(\$ 1,000 )& \$ 3,000 & \$ 4,000\end{array}$