Suire Corporation is considering dropping product D14E. Data from the company\'s

Question

Suire Corporation is considering dropping product D14E. 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 $198,500 of the fixed manufacturing expenses and $113,500 of the fixed selling and administrative expenses are avoidable if product D14E is discontinued.

Required:

a. According to the company's accounting system, what is the net operating income earned by product D14E? (Net losses should be indicated by a minus sign.)

b. What would be the financial advantage (disadvantage) of dropping product D14E? Should the product be dropped?

Sales $ 720,000 Variable expenses $ 331,000 Fixed manufacturing expenses $ 255,000 Fixed selling and administrative expenses $ 203,000

Explanation / Answer

Dear Student Thank you for using Chegg Please find below the answer Statementshowing Computations Paticulars Amount Sales               720,000.00 Variable costs            (331,000.00) Contribution margin = sales - VC               389,000.00 Fixed costs :   fixed manufacturing expenses                 198,500.00 fixed selling and administrative expenses               113,500.00 Fixed costs               312,000.00 Net operating income                 77,000.00 b) financial disadvantage of dropping product D14E is $77,000

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