Nutall Corporation is considering dropping product N28X. Data from the company\'
ID: 2408872 • Letter: N
Question
Nutall Corporation is considering dropping product N28X. Data from the company's accounting system regarding product N28X appear below:
All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $204,500 of the fixed manufacturing expenses and $119,500 of the fixed selling and administrative expenses are avoidable if product N28X is discontinued.
According to the company's accounting system, what is the net operating income or loss earned by product N28X? (Input the amount as a positive value regardless of whether there is a net operating loss or net operating income.)
What would be the effect on the company's overall net operating income of dropping product N28X? (Input the amount as a positive value.)
Should the product be dropped?
No
Nutall Corporation is considering dropping product N28X. Data from the company's accounting system regarding product N28X appear below:
Explanation / Answer
According to the company's accounting system, what is the net operating income or loss earned by product N28X?
Net operating loss = 63000
b1) What would be the effect on the company's overall net operating income of dropping product N28X?
Net operating loss when continue = 63000
Net operating loss when discontinue = 62500+95500 = 158000
So net operating loss increase by = 95000
b2) No
Sales 840000 Less: Variable expense -421000 Contribution margin 419000 Less: Fixed manufacturing expense -267000 Less: Fixed selling and administrative expense -215000 Net operating income -63000Related Questions
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