The management of Woznick Corporation has been concerned for some time with the financial performance of its product V86O and has considered discontinuing it on several occasions. Data from the company's accounting system for this product for last year appear below: In the company's accounting system all fixed expenses of the company are fully allocated to products. Further investigation has revealed that $30,000 of the fixed manufacturing expenses and $13,000 of the fixed selling and administrative expenses are avoidable if product V86O is discontinued.
What would be the financial advantage (disadvantage) from dropping product V86O?
A) ($35,000)
B) ($5,000)
C) $35,000
D) $5,000

Question

The management of Woznick Corporation has been concerned for some time with the financial performance of its product V86O and has considered discontinuing it on several occasions. Data from the company's accounting system for this product for last year appear below:  In the company's accounting system all fixed expenses of the company are fully allocated to products. Further investigation has revealed that $30,000 of the fixed manufacturing expenses and $13,000 of the fixed selling and administrative expenses are avoidable if product V86O is discontinued.
What would be the financial advantage (disadvantage) from dropping product V86O?
A) ($35,000) 
B) ($5,000) 
C) $35,000 
D) $5,000

Quizplus · Accepted Answer

11eacbfc_c63e_e841_8ffe_758633f82458_TB7552_00 The company would forego the profit of $35,000 if this product were dropped.

The Management of Woznick Corporation Has Been Concerned for Some