Chapter 12 and 13 Quiz BUS 210- Spring 2018 Name Section he management of Wengel

Question

Chapter 12 and 13 Quiz BUS 210- Spring 2018 Name Section he management of Wengel Corporation is considering dropping product B90D. Data from the company's accounting system appear below: Sales Variable expenses Fixed manufacturing expenses Fixed selling and administrative expenses $720,000 $374,000 $245,000 $209,000 All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $173,000 of the fixed manufacturing expenses and $150,000 of the fixed selling and administrative expenses are avoidable if product B90D is discontinued Required: disadvantage What would be the financial advantage ( Show your work! ) of dropping B90D? Should the product be dropped?

Explanation / Answer

Net operating income would decline by $23,000 if product B90D were dropped. Therefore, the product should not be dropped.

Keep the Product Drop the Product Difference Sales $720,000 $0 ($720,000) Variable expenses $374,000 $0 $374,000 Contribution margin $346,000 $0 ($346,000) Fixed expenses: Fixed manufacturing expenses $245,000 $72,000 $173,000 Fixed selling and administrative expenses $209,000 $59,000 $150,000 Total fixed expenses $454,000 $131,000 $323,000 Net operating income (loss) ($108,000) ($131,000) ($23,000)

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.