Question
Wengel Corporation management is considering discontinuing the B90D product. The data from the company's accounting system is shown below: Sales ps 740,700 Variable expends ps
Wengel Corporation management is considering discontinuing the B90D product. The data from the company's accounting system is shown below:
Sales | ps | 740,700 |
Variable expends | ps | 384,800 |
Fixed manufacturing costs | ps | 252,000 |
Fixed selling and administrative expenses | ps | 215,000 |
All fixed company expenses are fully allocated to products in the company's accounting system. Further investigation has revealed that $178,000 of fixed manufacturing costs and $154,300 of fixed selling and administrative costs can be avoided if the B90D product is discontinued.
Required:
What would be the financial advantage (disadvantage) of abandoning B90D? Should the product be discarded?
Net operating income (loss) would (decrease or increase) by $____ if product B90D were discontinued. Therefore, the product (should/should not) be dropped
Step by Step Solution
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Step: 1
The financial advantage disadvantage of abandoning the B90D product can be calculated as foll...Get Instant Access to Expert-Tailored Solutions
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Step: 2
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