The management of Freshwater Corporation is considering dropping product C11B. D
ID: 2473948 • Letter: T
Question
The management of Freshwater Corporation is considering dropping product C11B. 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 $209,500 of the fixed manufacturing expenses and $120,500 of the fixed selling and administrative expenses are avoidable if product C11B is discontinued.
What would be the effect on the company's overall net operating income if product C11B were dropped?
Overall net operating income would decrease by $189,500.
Overall net operating income would increase by $69,500.
Overall net operating income would increase by $189,500.
Overall net operating income would decrease by $69,500.
A customer has requested that Inga Corporation fill a special order for 2,700 units of product K81 for $32 a unit. While the product would be modified slightly for the special order, product K81's normal unit product cost is $22.00:
8.30
$22.00
Direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like modifications made to product K81 that would increase the variable costs by $1.90 per unit and that would require an investment of $17,000 in special molds that would have no salvage value.
This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order. If the special order is accepted, the company's overall net operating income would increase (decrease) by:
$(16,700)
$17,200
$(2,500)
$27,280
The management of Freshwater Corporation is considering dropping product C11B. Data from the company's accounting system appear below:
Explanation / Answer
1
Answer
Overall net operating income would decrease by $189,500.
2
Answer is 27280
Contribution lost -519500 ADD Avoidable fixed manufacturing expenses 209500 Avoidable selling and administrative expensess 120500 Overall net operating income would decrease by -189500Related Questions
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