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The management of Pooh Corporation is considering dropping product HNY. Data from the company's accounting system appear below: Sales $ 790,300 Variable expenses $ 410,700
The management of Pooh Corporation is considering dropping product HNY. Data from the company's accounting system appear below:
Sales | $ | 790,300 |
Variable expenses | $ | 410,700 |
Fixed manufacturing expenses | $ | 268,800 |
Fixed selling and administrative expenses | $ | 229,400 |
All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $190,000 of the fixed manufacturing expenses and $164,600 of the fixed selling and administrative expenses are avoidable if product HNY is discontinued.
Required:
1. What would be the financial advantage (disadvantage) of dropping HNY?
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