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George Lucas Corporation manufactures and sells a number of products, including a product called Tatooine. Results for last year for the manufacture and sale of
George Lucas Corporation manufactures and sells a number of products, including a product called Tatooine. Results for last year for the manufacture and sale of Tatooines are as follows: $ 960,000 Sales Less expenses: Variable production costs Sales commissions Salary of product manager Fixed product advertising Fixed manufacturing overhead Net operating loss $ 464,000 144,000 100,000 160,000 132,000 1,000,000 $ (40,000) George Lucas is trying to decide whether to discontinue the manufacture and sale of Tatooines. All expenses other than fixed manufacturing overhead are avoidable if the product is dropped. None of the fixed manufacturing overhead is avoidable. Assume that dropping Product Tatooine will have no effect on other products. The annual financial advantage (disadvantage) for the company of eliminating this product should be: Multiple Choice ($132,000) O ($172,000) $92,000 O $40,000 O ($92,000) a
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