Sales $932,000 Variable expenses $411,000 Fixed manufacturing expenses $346,000

Question

Sales $932,000 Variable expenses $411,000 Fixed manufacturing expenses $346,000 Fixed selling and administrative expenses $253,000 All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $213,000 of the fixed manufacturing expenses and $124,000 of the fixed selling and administrative expenses are avoidable if product C11B is discontinued. According to the company's accounting system, what is the net operating income earned by product C11B? $521,000 $78,000 $(521,000) $(78,000)

Explanation / Answer

Answer is $(78,000). According to the company's accounting system, what is the net operating income earned by product C11B is $(78,000) as follows.

in $ Continue C11B Drop the product Difference Sales             932,000                      -         (932,000) Variable Expense             411,000                      -          411,000 Contribution             521,000                      -         (521,000) Fixed Manufacturing Expenses             346,000             213,000        133,000 Fixed Selling and Administrative Expenses             253,000             124,000        129,000 Total Fixed Expenses             599,000             337,000        262,000 Net Operating Income             (78,000)            (337,000)       (259,000)

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