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The management of Freshwater Corporation is considering dropping product C11B. Data from the company's accounting system appear below: Sales $933,000 Variable expenses $410,500 Fixed manufacturing
The management of Freshwater Corporation is considering dropping product C11B. Data from the company's accounting system appear below:
Sales | $933,000 |
Variable expenses | $410,500 |
Fixed manufacturing expenses | $347,000 |
Fixed selling and administrative expenses | $254,000 |
All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $212,500 of the fixed manufacturing expenses and $123,500 of the fixed selling and administrative expenses are avoidable if product C11B is discontinued. |
What would be the effect on the company's overall net operating income if product C11B were dropped? |
Overall net operating income would decrease by $186,500. | |
Overall net operating income would increase by $78,500. | |
Overall net operating income would decrease by $78,500. | |
Overall net operating income would increase by $186,500. |
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