The management of Furrow Corporation is considering dropping product L07E. Data from the company's budget for the upcoming year appear below:- **Sales**: $830,000- **Variable expenses**: $365,000- **Fixed manufacturing expenses**: $291,000- **Fixed selling and administrative expenses**: $166,000In the company's accounting system, all fixed expenses are fully allocated to products. Further investigation has revealed that $186,000 of the fixed manufacturing expenses and $106,000 of the fixed selling and administrative expenses are avoidable if product L07E is discontinued. The financial advantage (disadvantage) for the company of eliminating this product for the upcoming year would be:**Multiple Choice:**- ($173,000)- $173,000

Sales 830,000 Less: Variable expense 365,000 Contribution margin 465,000 Less: Fixed manufacturing expense 291,000 Less: Fixed selling and administrative expense 166,000 Current income for the company 8,000 Fixed manufacturing expense unavoidable = (291,000 - 186,000) = 105,000 Fixed selling and administrative expense unavoidable = (166,000 - 106,000) = $60,000 Total expenses unavoidable = $165,000Hence financial disadvantage = (165,000 + 8,000) = ($173,000)

Business

Accounting

The management of Furrow Corporation is considering dropping product LO7E. Data from the company's budget for the upcoming year appear below: Sales Variable expenses $ 830,000 $ 365,000 $ 291,000 $ 166,000 Fixed manufacturing expenses Fixed selling and administrative expenses In the company's accounting system all fixed expenses of the company are fully allocated to products. Further investigation has revealed that $186,000 of the fixed manufacturing expenses and $106,000 of the fixed selling and administrative expenses are avoidable if product LO7E is discontinued. The financial advantage (disadvantage) for the company of eliminating this product for the upcoming year would be:

The management of Furrow Corporation is considering dropping product LO7E. Data from the company's budget for the upcoming year appear below: Sales Variable expenses $ 830,000 $ 365,000 $ 291,000 $ 166,000 Fixed manufacturing expenses Fixed selling and administrative expenses In the company's accounting system all fixed expenses of the company are fully allocated to products. Further investigation has revealed that $186,000 of the fixed manufacturing expenses and $106,000 of the fixed selling and administrative expenses are avoidable if product LO7E is discontinued. The financial advantage (disadvantage) for the company of eliminating this product for the upcoming year would be:

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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