The management of Corporation is considering dropping product U 51 y. Data from

Question

The management of Corporation is considering dropping product U 51 y. 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 280,000 of the fixed manufacturing expenses and 190,000 of the fixed selling and administrative expenses are avoidable if product is discontinued. What would be the effect on the company's overall pet operating income if product usely were dropped? Should the product be dropped?

Explanation / Answer

Answer:- sales. 980000

Less: Variable cost 568000

Contribution 412000

Less: Fixed manufacturing expenses 314000

Operating income 98000

If fixed manufacturing expenses and fixed selling anf distribution expenses are revealed than overall net operating income is 132000 so the product should not be dropped

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