The management of Freshwater Corporation is considering dropping product C11B. D
ID: 2497171 • 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 $207,000 of the fixed manufacturing expenses and $118,000 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 $62,000.
Overall net operating income would increase by $192,000.
Overall net operating income would decrease by $192,000.
Overall net operating income would increase by $62,000.
The management of Freshwater Corporation is considering dropping product C11B. Data from the company's accounting system appear below:
Explanation / Answer
Overall net income would decrease by 192000
Particulars Amount Loss Of Contribution 517000 Total Loss if product is dropped 517000 Less: Savings in fixed manufacturing 207000 Less: Savings in fixed selling cost 118000 Net Benefit of dropping the product 192000Related Questions
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