Nutall Corporation is considering dropping product N28X. Data from the company\'
ID: 2373047 • Letter: N
Question
Nutall Corporation is considering dropping product N28X. Data from the company's accounting system appear below:
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 $110,000 of the fixed selling and administrative expenses are avoidable if product N28X is discontinued.
According to the company's accounting system, what is the net operating income earned by product N28X? (Input the amount as a positive value. Omit the "$" sign in your response.)
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.)
Should the product be dropped?
Sales $ 650,000 Variable expense $ 280,000 Fixed manufacturing expenses $ 242,000 Fixed selling and administrative expense $ 190,000Explanation / Answer
sales keep the drop the difference
product product
sales 650000 0 650000
variable expenses 280000 0 280000
contribution margin 370000 0 370000
fixed expenses:
fixed manufacturing expenses 242000 47000 195000
fixed selling and admin 190000 80000 110000
total fixed expenses 432000 127000 305000
net operating lost 62000 127000 65000
Net operating income would decline by $65,000 if product U23N were dropped. Therefore, the product should not be dropped.
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