Product X has been considered a drag on profits at A Corporation for some time and management is considering discontinuing the product altogether. Data from the company's budget for the upcoming year appear below: Sales Variable expenses Fixed manufacturing expenses Fixed selling and administrative expenses $730,000 $350,000 $234,000 $161,000 In the company's accounting system all fixed expenses of the company are fully allocated to products. Further investigation has revealed that $144,000 of the fixed manufacturing expenses and $93,000 of the fixed selling and administrative expenses are avoidable if product X is discontinued. The financial advantage (disadvantage) for the company of eliminating this product for the upcoming year would be: A) $15,000 B) $143,000 C) ($143,000)
Product X has been considered a drag on profits at A Corporation for some time and management is considering discontinuing the product altogether. Data from the company's budget for the upcoming year appear below: Sales Variable expenses Fixed manufacturing expenses Fixed selling and administrative expenses $730,000 $350,000 $234,000 $161,000 In the company's accounting system all fixed expenses of the company are fully allocated to products. Further investigation has revealed that $144,000 of the fixed manufacturing expenses and $93,000 of the fixed selling and administrative expenses are avoidable if product X is discontinued. The financial advantage (disadvantage) for the company of eliminating this product for the upcoming year would be: A) $15,000 B) $143,000 C) ($143,000)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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A2
Transcribed Image Text:Exercises on Ch. 6: Differential Analysis: The Key to Decision Making
1. Product X has been considered a drag on profits at A Corporation for some time and
management is considering discontinuing the product altogether. Data from the company's
budget for the upcoming year appear below:
Sales
Variable expenses
Fixed manufacturing expenses
Fixed selling and administrative expenses
$730,000
$350,000
$234,000
$161,000
In the company's accounting system all fixed expenses of the company are fully allocated
to products. Further investigation has revealed that $144,000 of the fixed manufacturing
expenses and $93,000 of the fixed selling and administrative expenses are avoidable if
product X is discontinued. The financial advantage (disadvantage) for the company of
eliminating this product for the upcoming year would be:
A) $15,000
B) $143,000
C) ($143,000)
D) ($15,000)
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