Question

Nutall Corporation is considering dropping product N28X. Data from the company's accounting system appear below:

Sales $ 660,000
Variable expense $ 285,000
Fixed manufacturing expenses $ 244,000
Fixed selling and administrative expense $ 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 N28X is discontinued.
Required:
According to the company's accounting system, what is the net operating income earned by product N28X? (Input the amount as a positive value.)

Answer 1

net operating income earned by product N28X is $ 69,000.

Step-by-step explanation:

Only the avoidable costs will be accounted for in determining net income earned by N28X for its decision.

Sales $ 660,000

Less Variable expense ($ 285,000 )

Contribution $ 375,000

Fixed manufacturing expenses ($195,500 )

Fixed selling and administrative expense ($110,500)

Net Income / (loss) $ 69,000

Therefore, net operating income earned by product N28X is $ 69,000.