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Problem 3 (Textbook Reference: P6-4) - Decide whether to accept or reject a special order Following are sales and other operating data for the three
Problem 3 (Textbook Reference: P6-4) - Decide whether to accept or reject a special order Following are sales and other operating data for the three products made and sold by Ranger Company: Product Total Sales S 600,000 300,000S200,000 1,100,000 Manufacturing costs 60,000 $ 20,000 $ 60,000 S140,000 220,000 100,000 S600,000 IXe Variable S 280,000 Selling and administrative costs 52,000 90,000 882,000 218,000 Fixed Variable 20,000 $ 40,000$ 20,000 $ 20,000 $ 12,000 $ 30,000 $ Total costs Net income (loss) 400,000 S280,000 202,000 200,000 20,000 2,000) S In view of the net loss for Product C, Ranger's management is considering dropping that product. All variable costs are direct costs and would be eliminated if Product C were dropped. Fixed costs are indirect costs; no fixed costs would be eliminated. Assume that the space used to produce Product C would be left idle. Required a. Would you recommend the elimination of Product C? Give supporting computations. Hint: Utilize the table below to help you reach a conclusion! Remember to answer if you would keep or drop Product C. Ranger Company Relevant Revenues and Costs of Alte rnatives Keep Product C Eliminate Product Differe ntial Revenues Expenses (all variable) Net advantage (disadvantage) of ropping product C b. By how much would the company's overall net income increase or decrease if Product C was eliminated
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