Question
1. The management of Fannin Corporation is considering dropping product H58S. Data from the company's accounting system appear below: Sales $980,000 Variable expenses $394,000 Fixed
1. The management of Fannin Corporation is considering dropping product H58S. Data from the company's accounting system appear below: |
Sales | $980,000 |
Variable expenses | $394,000 |
Fixed manufacturing expenses | $376,000 |
Fixed selling and administrative expenses | $256,000 |
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 H58S is discontinued. What would be the effect on the company's overall net operating income if product H58S were dropped? |
A. Overall net operating income would decrease by $46,000.
B. Overall net operating income would increase by $46,000.
C. Overall net operating income would increase by $135,000.
D. Overall net operating income would decrease by $135,000.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started