The management of Heider Corporation is considering dropping product H58S. Data
ID: 2472371 • Letter: T
Question
The management of Heider Corporation is considering dropping product H58S. Data from the company's accounting system appear below:
In the company's accounting system all fixed expenses of the company are fully allocated to products. Further investigation has revealed that $213,000 of the fixed manufacturing expenses and $174,000 of the fixed selling and administrative expenses are avoidable if product H58S is discontinued. What would be the effect on the company's overall net operating income if product H58S were dropped?
The management of Heider Corporation is considering dropping product H58S. Data from the company's accounting system appear below:
Explanation / Answer
Without dropping H58S Sales 930000.00 Variable expenses 378000.00 552000.00 Fixed manufacturing expenses 360000.00 Fixed selling and administrative expenses 240000.00 Net Loss -48000.00 Without H58S is dropped Sales 930000.00 Variable expenses 378000.00 552000.00 Fixed manufacturing expenses 360000-213000 147000.00 Fixed selling and administrative expenses 240000-174000 66000.00 Net Profit 339000.00
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