Nutall Corporation is considering dropping product N28X. Data from the company\'
ID: 2459272 • Letter: N
Question
Nutall Corporation is considering dropping product N28X. Data from the company's accounting system appear below
Sales
All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $199,500 of the fixed manufacturing expenses and $114,500 of the fixed selling and administrative expenses are avoidable if product N28X is discontinued.
1.According to the company's accounting system, what is the net operating income earned by product N28X?
2. What would be the effect on the company's overall net operating income of dropping product N28X?
Nutall Corporation is considering dropping product N28X. Data from the company's accounting system appear below
Explanation / Answer
1.
Sales $740,000
less :- variable expense $341,000
Fixed manufacturing expense $257,000
Fixed selling and administrative expense $205,000
-------------- $803,000
Net Loss - $ 63,000
2.On dropping product N28X , the fixed manufacturing expense and fixed selling and administrative expense that would be avoided shall be added back to the Net loss and the profit improvement would be as follows :-
Net Loss - $63,000
Add back :- fixed manufacturing expense $199,500
fixed selling and administrative expense $114,500
---------------- $314,000
--------------
Net Income $ 251,000
---------------
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