TB Problem Qu. 12-178 Suire Corporation is considering dropping ...

Suire Corporation is considering dropping product D14E. Data from the company's accounting system appear below:

Sales	$	650,000
Variable expenses	$	280,000
Fixed manufacturing expenses	$	242,000
Fixed selling and administrative expenses	$	190,000

All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $195,000 of the fixed manufacturing expenses and $110,000 of the fixed selling and administrative expenses are avoidable if product D14E is discontinued.

Required:

a. According to the company's accounting system, what is the net operating income earned by product D14E? (Net losses should be indicated by a minus sign.)

b. What would be the financial advantage (disadvantage) of dropping product D14E? Should the product be dropped?