The management of Heider Corporation is considering dropping product J14V. Data
ID: 2483057 • Letter: T
Question
The management of Heider Corporation is considering dropping product J14V. Data from the company's accounting system appear below:
In the company's accounting system all fixed expenses of the company are fully allocated to products. Further investigation has revealed that $217,000 of the fixed manufacturing expenses and $178,000 of the fixed selling and administrative expenses are avoidable if product J14V is discontinued. What would be the effect on the company's overall net operating income if product J14V were dropped?
1. Overall net operating income would decrease by $34,000
2. Overall net operating income would increase by $34,000
3. Overall net operating income would increase by $175,000
4. Overall net operating income would decrease by $175,000
The management of Heider Corporation is considering dropping product J14V. Data from the company's accounting system appear below:
Sales Variable expenses Fixed manufacturing expenses Fixed selling and administrative expenses$242,000 $950,000 $380,000 $362,000Explanation / Answer
Answer 4. Overall net operating income would decrease by $175,000 Statement of Differential Costing Option 1 Option 2 Difference J14V is dropped Sales revenue 950,000 - (950,000) Variable Expenses (380,000) - 380,000 Fixed Manufacturing Expenses (362,000) (145,000) 217,000 Fixed Selling & Admn. Exp. (242,000) (64,000) 178,000 Net income (34,000) (209,000) (175,000)
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.