The following additional informartion is available: The factory rent of $1.800 a

Question

The following additional informartion is available: The factory rent of $1.800 assigned lo Product C is avoidable if the producs were dropped the company's total depreciation would not be affected by dropping C. Eliminating Product C will reduce the monthly utility bill from $1.800 to $350. All supervisors' salanes are avoidable If Product C is discontinued, the maintenance department will be able to reduce monthly expenses from 53.420 to $2.290 Elimination of Product C will make it possible to cut two persons from the administrative staff, their combined salaries total S3.060 Prepare an analysis for Product C. Should Product C be eliminated? Yes No

Explanation / Answer

Option A.

Contribution margin foregone by eliminating C is $12000

Option B

Costs reduced By eliminating Project C

1.Rent Avoidable $1800

2.Utilities reduction (1800-950) $ 850

3.Sup Salary $3800

4.Maint cost reduced by $1130

5.saving of admin staff cost $3080

Total Cost saving if C discontinue $ 10660

Conclusion: here by running Project C Contribution margin getting is $12000,if we want to discontinue the project C Total costs will save up to $10660 so it is better to continue Product C also.

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