The management of Furrow Corporation is considering dropping product L07E.Data from the company's budget for the upcoming 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 $186,000 of the fixed manufacturing expenses and $106,000 of the fixed selling and administrative expenses are avoidable if product L07E is discontinued.The financial advantage (disadvantage)for the company of eliminating this product for the upcoming year would be:
A) $8,000
B) ($173,000)
C) ($8,000)
D) $173,000

Question

The management of Furrow Corporation is considering dropping product L07E.Data from the company's budget for the upcoming 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 $186,000 of the fixed manufacturing expenses and $106,000 of the fixed selling and administrative expenses are avoidable if product L07E is discontinued.The financial advantage (disadvantage)for the company of eliminating this product for the upcoming year would be:
A) $8,000 
B) ($173,000) 
C) ($8,000) 
D) $173,000

Quizplus · Accepted Answer

11ea7761_15f4_3418_81a5_5f3e7c393b0a_TB2580_00 The segment margin of $173,000 would be lost if product L07E were dropped.

The Management of Furrow Corporation Is Considering Dropping Product L07E