Needham Manufacturing produces three products. The following table summarizes operations for the most recent year: This is
Question:
Needham Manufacturing produces three products. The following table summarizes operations for the most recent year:
This is the third year that a loss has been reported for product Q72. Frank Needham, the owner and manager of Needham Manufacturing, stated at the recent meeting of senior managers, “It is time we stopped producing Q72.” If we had not produced this product this past year, our income would be $42,000 higher than what we achieved.” The company accountant has provided you with the following additional information: If product Q72 is eliminated, 40% of the fixed manufacturing cost attributed to Q72 would be eliminated. Also, if Q72 is eliminated, the sales of GT45 and R38 would each decline by 5% because they are associated products.
Required
What will be the change in corporate income at Needham Manufacturing if Q72 is discontinued?
Step by Step Answer:
Management Accounting Information For Decision Making
ISBN: 9781618533517
7th Edition
Authors: Anthony A. Atkinson