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.
-Assume that dropping Product JYMP will have no effect on other products.The annual financial advantage (disadvantage)for the company of eliminating this product should be:
A) $40,000
B) ($132,000)
C) ($92,000)
D) ($172,000)

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.
-Assume that dropping Product JYMP will have no effect on other products.The annual financial advantage (disadvantage)for the company of eliminating this product should be:
A) $40,000 
B) ($132,000) 
C) ($92,000) 
D) ($172,000)

Quizplus · Accepted Answer

11ea7761_160a_0661_81a5_13778ede734e_TB2580_00 By dropping the product, the company will forego $92,000 in net financial benefits.

The Management of Woznick Corporation Has Been Concerned for Some