The management of Rodarmel Corporation is considering dropping product G91Q. 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 $57,000 of the fixed manufacturing expenses and $40,000 of the fixed selling and administrative expenses are avoidable if product G91Q is discontinued.
Required:
a. What is the net operating income earned by product G91Q according to the company's accounting system? Show your work!
b. What would be the effect on the company's overall net operating income of dropping product G91Q? Should the product be dropped? Show your work!

Question

The management of Rodarmel Corporation is considering dropping product G91Q. 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 $57,000 of the fixed manufacturing expenses and $40,000 of the fixed selling and administrative expenses are avoidable if product G91Q is discontinued.
Required:
a. What is the net operating income earned by product G91Q according to the company's accounting system? Show your work!
b. What would be the effect on the company's overall net operating income of dropping product G91Q? Should the product be dropped? Show your work!

Quizplus · Accepted Answer

The Answer of The management of Rodarmel Corporation is considering dropping product G91Q. 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 $57,000 of the fixed manufacturing expenses and $40,000 of the fixed selling and administrative expenses are avoidable if product G91Q is discontinued.
Required:
a. What is the net operating income earned by product G91Q according to the company's accounting system? Show your work!
b. What would be the effect on the company's overall net operating income of dropping product G91Q? Should the product be dropped? Show your work!

The Management of Rodarmel Corporation Is Considering Dropping Product G91Q