The management of Rodarmel Corporation is considering dropping product G91Q. Dat

Question

The management of Rodarmel Corporation is considering dropping product G91Q. Data from the company's accounting system appear below:

All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $57,000 of the fixed manufacturing expenses and $40,000 of the fixed selling and administrative expenses are avoidable if product G91Q is discontinued.

What is the net operating income(loss) earned by product G91Q according to the company's accounting system? (Input the amount as a positive value.)

What would be the effect on the company's overall net operating income of dropping product G91Q? (Input the amount as a positive value.)

   Sales $ 370,000   Variable expenses $ 170,000   Fixed manufacturing expenses $ 118,000   Fixed selling and administrative expenses $ 89,000

Explanation / Answer

B1) Net operating income INCREASES/DECREASES BY = $57,000 + $40000 = $97000

B2) Yes,The Product should be dropped

particulars amount Sales 370000 Variable expenses 170000 Fixed manufacturing expenses 118000 Fixed selling and administrative expenses 89000 Net Loss -7000

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