21) Camera Corner is considering eliminating Model AE2 from its camera line beca

Question

21) Camera Corner is considering eliminating Model AE2 from its camera line because of losses over the past quarter. The past three months of information for Model AE2 are summarized below: $300,000 Sales (1,000 units) Manufacturing costs: 150,000 60,000 100,000 Direct materials Direct labor ($15 per hour) Overhead Operating loss overhead costs are 70% variable and the remaining 30% is depreciation of special equipment for model AE2 that has no resale value. If Model AE2 is dropped from the product line, operating income will (indicate the amount and increase or decrease).

Explanation / Answer

Determine product should be continue or drop :

If company drop product then operating income will decrease by (20000)

Operating income if product continue (10000) Operatingg income if product drop (100000*30%) (30000) Operating income will decrease if product drop (20000)

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