Suire Corporation is considering dropping product D14E. Data from the company's accounting system appear below: Sales $ 620,000 Variable expenses $ 255,000 Fixed manufacturing expenses $ 236,000 Fixed selling and administrative expenses $184,000 All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $193,500 of the fixed manufacturing expenses and $108,500 of the fixed selling and administrative expenses are avoidable if product D14E is discontinued. Required: a. According to the company's accounting system, what is the net operating income earned by product D14E? (Net losses should be indicated by a minus sign.) b. What would be the financial advantage (disadvantage) of dropping product D14E? Should the product be dropped?
Suire Corporation is considering dropping product D14E. Data from the company's accounting system appear below: Sales $ 620,000 Variable expenses $ 255,000 Fixed manufacturing expenses $ 236,000 Fixed selling and administrative expenses $184,000 All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $193,500 of the fixed manufacturing expenses and $108,500 of the fixed selling and administrative expenses are avoidable if product D14E is discontinued. Required: a. According to the company's accounting system, what is the net operating income earned by product D14E? (Net losses should be indicated by a minus sign.) b. What would be the financial advantage (disadvantage) of dropping product D14E? Should the product be dropped?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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am .106.
Transcribed Image Text:Suire Corporation is considering dropping product D14E. Data from the company's accounting system appear below:
Sales
$ 620,000
Variable expenses
$ 255,000
Fixed manufacturing expenses
$ 236,000
Fixed selling and administrative expenses $184,000
All fixed expenses of the company are fully allocated to products in the company's accounting system. Further
investigation has revealed that $193,500 of the fixed manufacturing expenses and $108,500 of the fixed selling and
administrative expenses are avoidable if product D14E is discontinued.
Required:
a. According to the company's accounting system, what is the net operating income earned by product D14E? (Net losses
should be indicated by a minus sign.)
b. What would be the financial advantage (disadvantage) of dropping product D14E? Should the product be dropped?
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