Question

ABC Corporation is considering dropping product D14E. Data from the company's accounting system appear below: Sales $ 660,000 Variable expenses $ 285,000 Fixed manufacturing expenses $ 244,000 Fixed selling and administrative expenses $ 192,000 All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $195,500 of the fixed manufacturing expenses and $110,500 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

Answer 1

Answer: $61000 Loss

Step-by-step explanation:

The net operating income earned by product D14E will be calculated as:

Sales : $660,000

Less: Variable expenses : $285,000

Less: Fixed manufacturing expenses : $244,000

Less: Fixed selling and distribution expenses : $192,000

Net operating income = -$61000