Drummer Corporation
cybacatx (Not rated)
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The management of Drummer Corporation is considering dropping product D84L. Data from the company's accounting system appear below.
Sales | $800,000 |
Variable Expenses | $440,000 |
Fixed Manufacturing Expenses | $248,000 |
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 $201,000 of the fixed manufacturing expenses and $156,000 of the fixed selling and administrative expenses are avoidable if product D84L is discontinued.
Required:
What would be the effect on the company's overall net operating income if product D84L were dropped? Should the product be dropped? Show your work!
- 10 years ago
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