The management of Thews Corporation is considering dropping product E28I. Data f

Question

The management of Thews Corporation is considering dropping product E28I. Data from the company%u2019s accounting system appear below:

  Sales

478,000

  Variable expenses

209,000

  Fixed manufacturing expenses

162,000

  Fixed selling and administrative expenses

139,000

All fixed expenses of the company are fully allocated to products in the company%u2019s accounting system. Further investigation has revealed that $76,000 of the fixed manufacturing expenses and $66,000 of the fixed selling and administrative expenses are avoidable if product E28I is discontinued.

What is the net operating income (loss) earned by product E28I according to the company%u2019s accounting system? (Input the amount as positive value. Omit the "$" sign in your response.)

What would be the effect on the company%u2019s overall net operating income of dropping product E28I?(Input the amount as positive value. Omit the "$" sign in your response.)

The management of Thews Corporation is considering dropping product E28I. Data from the company%u2019s accounting system appear below:

Explanation / Answer

Hi,

Please find the answer as follows:

Part A:

Answers is -32000

Part B:

Net Income would decrease by 110000

Part C:

No.

Thanks.

Sales 478000 Variable expenses 209000 Fixed manufacturing expenses 162000 Fixed selling and administrative expenses 139000 Net Operating Income/Loss -32000

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