Question
Suire Corporation is considering dropping product D14E. Data from the company's accounting system appear below: Sales $830,000 Variable expenses $416,000 Fixed manufacturing expenses $266,000 Fixed
Suire Corporation is considering dropping product D14E. Data from the company's accounting system appear below:
Sales | $830,000 |
Variable expenses | $416,000 |
Fixed manufacturing expenses | $266,000 |
Fixed selling and administrative expenses | $214,000 |
All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $204,000 of the fixed manufacturing expenses and $119,000 of the fixed selling and administrative expenses are avoidable if product D14E is discontinued.
Required:
a. According to the company's accounting system, what is the net operating income earned by product D14E? (Net losses should be indicated by a minus sign.)
b. What would be the financial advantage (disadvantage) of dropping product D14E?
Should the product be dropped?
et operating income (loss) $ (66,000) b. Financial advantage (disadvantage) The product | dropped
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