15. The management of Wengel Corporation is considering dropping product B90D. D
ID: 2410827 • Letter: 1
Question
15. The management of Wengel Corporation is considering dropping product B90D. 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 $178,000 of the fixed manufacturing expenses and $154,300 of the fixed selling and administrative expenses are avoidable if product B90D is discontinued.
Required:
What would be the financial advantage (disadvantage) of dropping B90D? Should the product be dropped?
net operating income (loss) would (decline or increase) by $____ if product B90Dwere droped. Therefor the product (should/should not) be dropped
Sales $ 740,700 Variable expenses $ 384,800 Fixed manufacturing expenses $ 252,000 Fixed selling and administrative expenses $ 215,000Explanation / Answer
Calculate net operating income (loss) if product continue :
Net operating income (loss) if product discontinue :
Financial disadvantage = 111100-134700 = -23600
No, product should not be dropped.
Net operating (loss) would increase by 23600 if product B90D were dropped. Therefore the product should not be dropped
Sales 740700 Variable expense -384800 Fixed manufacturing expense -252000 Fixed selling and administrative epense -215000 Net oeprating income (loss) -111100Related Questions
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