Nutall Corporation is considering dropping product N28X. Data from the company\'

Question

Nutall Corporation is considering dropping product N28X. Data from the company's accounting system appear below STT0 000 $356.000 260,000 Fxed seling and administrative expense $208,000 Variable expense All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $201,000 of the fixed manufacturing expenses and $116,000 of the fixed selling and administrative expenses are avoidable if product N28X is discontinued. Required: According to the company's accounting system, what is the net operating income earned by product N28X? (Input the amount as a positive value.) b1What would be the effect on the company's overall net operating income of dropping product N28X? (Input the amount as a positive value.) b-2.Should the product be dropped?

Explanation / Answer

a-1 Sales 770000 Variable expenses 356000 Contribution margin 414000 Fixed manufacturing expenses 260000 Fixed selling and administrative expenses 208000 Net operating income(loss) -54000 Net operating loss = $54000 b-1 Loss in Contribution margin -414000 Avoidable fixed expenses: Fixed manufacturing expenses 201000 Fixed selling and administrative expenses 116000 Change in operating income -97000 Net operating income decreases by $97000 b-2 No

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