Question
The management of Calemeero Inc. is considering dropping product Y sunglasses. Data from the company's accounting system for this product for last year appear below:
The management of Calemeero Inc. is considering dropping product Y sunglasses. Data from the company's accounting system for this product for last year appear below:
Sales | $830,000 |
Variable expenses | $390,000 |
Fixed manufacturing expenses | $266,000 |
Fixed selling and administrative expenses | $232,000 |
All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $111,000 of the fixed manufacturing expenses and $103,000 of the fixed selling and administrative expenses are avoidable if product Y sunglasses is discontinued.
What would be the financial advantage (disadvantage) from dropping product Y sunglasses?
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