The management of Wengel Corporation is considering dropping product B90D. Data

ID: 2410262 • Letter: T

Question

The management of Wengel Corporation is considering dropping product B90D. 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 $177,000 of the fixed manufacturing expenses and $153,400 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?

Sales $ 736,400 Variable expenses $ 382,600 Fixed manufacturing expenses $ 250,600 Fixed selling and administrative expenses $ 213,800

Explanation / Answer

Sales

736400

(-) Variable Exp

382600

(-) Fixed Manufacturing Exp (Variable only)

177000

(-) Fixed Selling & Adm Exp (Variable only)

153400

Financial Disadvantage of Dropping B90D

23400