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noben 0. Suire Corporation is considering drop considering dropping product D14E. Data from the company's accounting system appear below: Sales Variable expenses Fixed manufacturing expenses
noben 0. Suire Corporation is considering drop considering dropping product D14E. Data from the company's accounting system appear below: Sales Variable expenses Fixed manufacturing expenses Fixed selling and administrative expenses $340,000 $156,000 $116,000 $ 75,000 All fixed expenses of the company are fully allocated to products in the company's accounung system. Further investigation has revealed that $72,000 of the fixed manufacturing expenses and $48,000 of the fixed selling and administrative expenses are avoidable if product D14E 18 discontinued. Required: a. According to the company's accounting system, what is the net operating income earned by product D14E? b. What would be the financial advantage (disadvantage) of dropping product D14E? Should the product be dropped? Chapter 12 21. Olinick Corporation is considering a project that would require an investment of $343,000 and would last for 8 years. The incremental annual revenues and expenses generated by the project during those 8 years would be as follows (Ignore income taxes.): $ 227,000 52,000 175,000 Sales Variable expenses Contribution margin Fixed expenses: Salaries Rents Depreciation Total fixed expenses Net operating income 27,000 41,000 40,000 108,000 $ 67,000 The scrap value of the project's assets at the end of the project would be $23,000. The cash inflows occur evenly throughout the year. The payback period of the project is closest to: A) 3.0 years B) 5.1 years C) 3.2 years D) 4.8 years 22. Puello Corporation has provided the following data concerning an investment project that it is considering: 10 Page
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