The management of Wengel Corporation is considering dropping product B90D. Data from the company's accounting system appear below:
Sales | $ | 790,300 |
Variable expenses | $ | 410,700 |
Fixed manufacturing expenses | $ | 268,800 |
Fixed selling and administrative expenses | $ | 229,400 |
All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $190,000 of the fixed manufacturing expenses and $164,600 of the fixed selling and administrative expenses are avoidable if product B90D is discontinued.
Required:
What would be the financial advantage (disadvantage) of dropping B90D? Should the product be dropped?
Wengel Corporation | ||
Computation of Net Operating Income (Loss) if product continue | ||
$ | $ | |
Sales | 790,300.00 | |
Less: | ||
Variable Expenses | 410,700.00 | |
Fixed manufacturing expenses | 268,800.00 | |
Fixed selling and administrative expense | 229,400.00 | 908,900.00 |
Net operating Income (Loss) | (118,600.00) | |
Wengel Corporation | ||
Computation of Net Operating Income (Loss) if product discontinue | ||
$ | ||
Fixed manufacturing expenses ( 268,800 - 190,000) | (78,800.00) | |
Fixed selling and administrative expense ( 229,400 - 164,600) | (64,800.00) | |
Net operating Income (Loss) | (143,600.00) | |
Financial disadvantage = 118,600 - 143,600 = -25,000 | ||
Hence, it is advised that product should not be dropped |
The management of Wengel Corporation is considering dropping product B90D. Data from the company's accounting system...
The management of Wengel Corporation is considering dropping product B90D. Data from the company's accounting system appear below: Sales $ 790,300 Variable expenses $ 410,700 Fixed manufacturing expenses $ 268,800 Fixed selling and administrative expenses $ 229,400 All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $190,000 of the fixed manufacturing expenses and $164,600 of the fixed selling and administrative expenses are avoidable if product B90D is discontinued....
The management of Wengel Corporation is considering dropping product B90D. Data from the company's accounting system appear below: Sales $ 803,200 Variable expenses $ 417,300 Fixed manufacturing expenses $ 273,000 Fixed selling and administrative expenses $ 233,000 All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $193,000 of the fixed manufacturing expenses and $167,300 of the fixed selling and administrative expenses are avoidable if product B90D is discontinued....
The management of Wengel Corporation is considering dropping product B90D. Data from the company's accounting system appear below: Sales$803,200 Variable expenses$417,300 Fixed manufacturing expenses$273,000 Fixed selling and administrative expenses$233,000 All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $193,000 of the fixed manufacturing expenses and $167,300 of the fixed selling and administrative expenses are avoidable if product B90D is discontinued. Required: What would be the financial advantage...
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