Answered: net operating income

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

The management of M Corporation has been concerned for some time with the financial performance of its product I54J and has considered discontinuing it on several occasions. Data from the company's accounting system appear below:

Sales	$ 650,000
Variable Expenses	$ 293,000
Fixed manufacturing expense	$ 221,000
Fixed selling and administrative expense	$ 150,000

In the company's accounting system all fixed expenses of the company are fully allocated to products. Further investigation has revealed that $95,000 of the fixed manufacturing expenses and $85,000 of the fixed selling and administrative expenses are avoidable if product I54J is discontinued. According to the company's accounting system, what is the net operating income earned by

product I54J?

A. $14,000

B. ($357,000)

C. ($14,000)

D. $357,000

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