Question
XYZ manufactures and sells a number of products, including Product G. Results for last year for the manufacture and sale of Product G are as
XYZ manufactures and sells a number of products, including Product G. Results for last year for the manufacture and sale of Product G are as follows: Sales $50,000 Less expenses: Variable costs $40,000 Fixed costs 36,000 76,000 Net operating loss $(26,000) XYZ is trying to decide whether or not to discontinue Product G. Two thirds of fixed costs are avoidable if the product is dropped. Assume that dropping Product G will have no effect on other products. What is the financial advantage (disadvantage) of dropping Product G? A. $40,000 financial advantage B. $26,000 financial advantage C. $14,000 financial advantage D. $2,000 financial advantage
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