Question
The management of Farry Corporation is considering dropping product L07. Data from the company's budget for the upcoming year appear below: Sales $ 830,000 Variable
The management of Farry Corporation is considering dropping product L07. Data from the company's budget for the upcoming year appear below:
Sales | $ 830,000 |
Variable expenses | $ 365,000 |
Fixed manufacturing expenses | $ 291,000 |
Fixed selling and administrative expenses | $ 166,000 |
In the company's accounting system all fixed expenses of the company are fully allocated to products. Further investigation has revealed that $186,000 of the fixed manufacturing expenses and $106,000 of the fixed selling and administrative expenses are avoidable if product L07 is discontinued. The financial advantage (disadvantage) for the company of eliminating this product for the upcoming year would be:
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Auditing Cases An Active Learning Approach
Authors: Mark S. Beasley, Frank A. Buckless, Steven M. Glover, Douglas F. Prawitt
2nd Edition
9781266566899
