Question

alser Corporation manufactures and sells a number of products, including a product called JYMP. Results for last year for the manufacture and sale of JYMPs are as follows: Sales $ 960,000 Less expenses: Variable production costs $ 464,000 Sales commissions 144,000 Salary of product manager 100,000 Fixed product advertising 160,000 Fixed manufacturing overhead 132,000 1,000,000 Net operating loss $ (40,000) Balser is trying to decide whether to discontinue the manufacture and sale of JYMPs. All expenses other than fixed manufacturing overhead are avoidable if the product is dropped. None of the fixed manufacturing overhead is avoidable. Assume that dropping Product JYMP will have no effect on other products. The annual financial advantage (disadvantage) for the company of eliminating this product should be:

Answer 1

($2,000)

Step-by-step explanation:

Missing word "Assume that dropping Product JYMP would result in a $90,000 increase in the contribution margin of other products"

Particulars Amount

Loss in contribution margin of JYMP ($352,000)

($960000-$464000-$144000)

Avoidable fixed costs $260,000 ($160000+$100000)

Additional contribution margin $90,000

Financial (disadvantage) ($2,000)

So, the annual financial (disadvantage) for the company of eliminating this product will be ($2,000)