Nutall Corporation is considering dropping product N28X. Data from the company\'
ID: 2373042 • Letter: N
Question
Nutall Corporation is considering dropping product N28X. Data from the company's accounting system appear below:
Sales $ 650,000
Variable expense $ 280,000
Fixed manufacturing expenses $ 242,000
Fixed selling and administrative expense $ 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 $110,000 of the fixed selling and administrative expenses are avoidable if product N28X is discontinued.
Required:
a.
According to the company's accounting system, what is the net operating income earned by product N28X? (Input the amount as a positive value. Omit the "$" sign in your response.)
$
b-1.
What would be the effect on the company's overall net operating income of dropping product N28X? (Input the amount as a positive value. Omit the "$" sign in your response.)
Net operating income would be by $ .
b-2.
Should the product be dropped?
Yes or No?
Explanation / Answer
a. net operating income = 650,000-280,000-242,000-190,000 = -62,000
b. if discontined
net operating income = 243,000
yes the product should be dropped
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