Nutall Corporation is considering dropping product N28X. Data from the company\'

Question

Nutall Corporation is considering dropping product N28X. 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 $202,500 of the fixed manufacturing expenses and $117,500 of the fixed selling and administrative expenses are avoidable if product N28X is discontinued.

According to the company's accounting system, what is the net operating income earned by product N28X? (Input the amount as a positive value. Omit the "$" sign in your response.)

What would be the effect on the company's overall net operating income of dropping product N28X? (Input the amount as a positive value. Omit the "$" sign in your response.)

Should the product be dropped?

  Sales $ 800,000       Variable expense $ 381,000       Fixed manufacturing expenses $ 263,000       Fixed selling and administrative expense $ 211,000    

Explanation / Answer

Sales 800000 Variable Expenses 381000 Contribution 419000 Fixed Costs Manufacturing Expenses 263000 Sellin & Admin 211000 474000 Net Operating Income -55000 If the product is dropped Sales 0 Variable Expenses 0 Contribution 0 Fixed Costs Manufacturing Expenses 60500 Sellin & Admin 93500 154000 Net Operating Income -154000 The product should not be dropped as the the loss will increase if the product is dropped

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