Nutall Corporation is considering dropping product N28X. Data from the company\'
ID: 2482262 • Letter: N
Question
Nutall Corporation is considering dropping product N28X. 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 $193,000 of the fixed manufacturing expenses and $108,000 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 earned by product N28X? (Input the amount as a positive value.)
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?
Nutall Corporation is considering dropping product N28X. Data from the company's accounting system appear below:
Explanation / Answer
Answer a.
Fixed Cost = Fixed Manufacturing + Fixed Selling And Administrative Expenses
= 234,000 + 182,000 = 416,000
Net Operating Income/Loss = Sales - Variable Cost - Fixed Cost
= 610,000 - 246,000 - 416,000
Net Loss= (52,000)
Answer b 1.
The company is currently having the net loss of 52,000.
If the activity are dropped the ompany has to bear the
Total Fixed Expenses the company has to bear is 115,000 (41,000 + 74,000) even if the product is dropped.
So, net loss is 63,000 (115,000 - 52,000).
Answer b 2.
The company should not drop the activity as the company will suffer more loss.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.