Value TB Problem Qu. 12-175 The management of Wengel Corporation 3 The managemen

ID: 2411184 • Letter: V

Question

Value TB Problem Qu. 12-175 The management of Wengel Corporation 3 The management of Wengel Corporation is consadening dropping product B90D Data fros the company's accountng system appeat below Variable expensos Pixed manufacturing expensers Fixed solling and adsinist rative expenser 53, 200 5391, 300 216, 200 S218, 601o All fxed expenses of the company are fuly alocated to prodacts n the company's accounting system Further investsgation has revealed that 5 1,000 of the fsed mandfacturing expenses and sise,s0o or the Twed seling and amiristratve expenses ae Required: Whst would be the Inancial advntage idnadvontagel of dropoing 8900 Should the product be dropped Next > d or retumed

Explanation / Answer

Particulars

Keep Product B90D

Drop Product B90D

Difference in Net Income

Sales

753,200.00

(753,200.00)

Less : Variable expenses

391,300.00

Contribution margin

361,900.00

(361,900.00)

Less : Fixed manufacturing expenses

256,200.00

75,200.00

181,000.00

Less : Fixed selling and administrative expenses

218,600.00

61,700.00

156,900.00

Net operating Loss

(112,900.00)

(136,900.00)

(24,000.00)

Financial Disadvantages fof Dropping B90D

Net operating Loss would Increase by $24,000 if product B90D were dropped. Therefore, the product should not be dropped.