Suire Corporation is considering dropping product D14E. Data from the company's accounting system appear below: Sales...

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?

Solutions

Expert Solution

ekkarill92 answered 1 year ago

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