The management of Bonga Corporation is considering dropping product D74F. Data from the company's accounting system for this product for last year appear below: All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $111,000 of the fixed manufacturing expenses and $103,000 of the fixed selling and administrative expenses are avoidable if product D74F is discontinued.
What would be the financial advantage (disadvantage) from dropping product D74F?
A) $226,000
B) $58,000
C) ($226,000)
D) ($58,000)

Question

The management of Bonga Corporation is considering dropping product D74F. Data from the company's accounting system for this product for last year appear below:  All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $111,000 of the fixed manufacturing expenses and $103,000 of the fixed selling and administrative expenses are avoidable if product D74F is discontinued.
What would be the financial advantage (disadvantage) from dropping product D74F?
A) $226,000 
B) $58,000 
C) ($226,000) 
D) ($58,000)

Quizplus · Accepted Answer

11eacbfc_c63d_1374_8ffe_7fa75547d715_TB7552_00 The company would forego the profit of $226,000 if this product were dropped.

The Management of Bonga Corporation Is Considering Dropping Product D74F