The management of Heider Corporation is considering dropping product J14V. Data
ID: 2497141 • 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 $245,000 of the fixed manufacturing expenses and $206,000 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
The management of Heider Corporation is considering dropping product J14V. Data from the company's accounting system appear below:
Explanation / Answer
Particulars Amount Savings in Fixed manufacturing cost if product J14V is continued 245000 Savings in Fixed Selling cost if product J14V is continued 206000 Total Savings in fixed cost 451000 Loss Of contribution 586000 Fixed Manufacturing cost 131000 Fixed selling cost 50000 Net Loss If Product JV 14 is discontinued -316000
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