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The management of Wengel Corporation is considering dropping product B90D. Data from the company's accounting system appear below: Sales$ 832,500Variable expenses$ 432,500Fixed manufacturing expenses$ 282,800Fixed
The management of Wengel Corporation is considering dropping product B90D. Data from the company's accounting system appear below:
Sales$ 832,500Variable expenses$ 432,500Fixed manufacturing expenses$ 282,800Fixed selling and administrative expenses$ 241,400
All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $200,000 of the fixed manufacturing expenses and $173,400 of the fixed selling and administrative expenses are avoidable if product B90D is discontinued.
Required:
What would be the financial advantage (disadvantage) of dropping B90D? Should the product be dropped?
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