The management of Wengel Corporation is considering dropping product B90D. Data from the company's accounting system appear below:
All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $173,000 of the fixed manufacturing expenses and $150,000 of the fixed selling and administrative expenses are avoidable if product B90D is discontinued.
Required:
What would be the financial advantage (disadvantage) of dropping B90D? Should the product be dropped? Show your work!

Question

The management of Wengel Corporation is considering dropping product B90D. Data from the company's accounting system appear below:
  All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $173,000 of the fixed manufacturing expenses and $150,000 of the fixed selling and administrative expenses are avoidable if product B90D is discontinued.
Required:
What would be the financial advantage (disadvantage) of dropping B90D? Should the product be dropped? Show your work!

Quizplus · Accepted Answer

The Answer of The management of Wengel Corporation is considering dropping product B90D. Data from the company's accounting system appear below:
  All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $173,000 of the fixed manufacturing expenses and $150,000 of the fixed selling and administrative expenses are avoidable if product B90D is discontinued.
Required:
What would be the financial advantage (disadvantage) of dropping B90D? Should the product be dropped? Show your work!

The Management of Wengel Corporation Is Considering Dropping Product B90D