Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Talal Corporation has two products AB1 and AB2. The corporation is considering to drop products AB1 or AB2. Information from the company's accounting system appear
Talal Corporation has two products AB1 and AB2. The corporation is considering to drop products AB1 or AB2. Information from the company's accounting system appear below: Products Sales Variable expenses Fixed manufacturing expenses Fixed selling and administrative expenses ABI S600,000 S330,000 $200,000 S150,000 AB2 S450,000 $200,000 $90,000 $360,000 All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that 20% of the fixed manufacturing expenses and 30% of the fixed selling and administrative expenses are avoidable if product AB1 is discontinued. The investigation also shows that one-third of the fixed manufacturing expenses and two-third of the fixed selling and administrative expenses are avoidable if product AB2 is discontinued Required: a. What is the net operating income earned by product AB1 according to the company's accounting system? b. What is the net operating income earned by product AB2 according to the company's accounting system? c. What is the financial advantage (disadvantage) of dropping product AB1?Should product ABI be dropped? d. What is the financial advantage (disadvantage) of dropping product AB2? Should product AB2 be dropped? For the folhar press Alt+F10 (PC) Or ALTFN+F10 (Mac)
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