The management of Fannin Corporation is considering dropping product H58S. Data from the company's accounting system appear below: In the company's accounting system all fixed expenses of the company are fully allocated to products. Further investigation has revealed that $90,000 of the fixed manufacturing expenses and $42,000 of the fixed selling and administrative expenses are avoidable if product H58S is discontinued. What would be the effect on the company's overall net operating income if product H58S were dropped?
A)Overall net operating income would decrease by $137,000.
B)Overall net operating income would increase by $137,000.
C)Overall net operating income would decrease by $151,000.
D)Overall net operating income would increase by $151,000.

Question

The management of Fannin Corporation is considering dropping product H58S. Data from the company's accounting system appear below:  In the company's accounting system all fixed expenses of the company are fully allocated to products. Further investigation has revealed that $90,000 of the fixed manufacturing expenses and $42,000 of the fixed selling and administrative expenses are avoidable if product H58S is discontinued. What would be the effect on the company's overall net operating income if product H58S were dropped?
A)Overall net operating income would decrease by $137,000. 
B)Overall net operating income would increase by $137,000. 
C)Overall net operating income would decrease by $151,000. 
D)Overall net operating income would increase by $151,000.

Quizplus · Accepted Answer

The Answer of The management of Fannin Corporation is considering dropping product H58S. Data from the company's accounting system appear below:  In the company's accounting system all fixed expenses of the company are fully allocated to products. Further investigation has revealed that $90,000 of the fixed manufacturing expenses and $42,000 of the fixed selling and administrative expenses are avoidable if product H58S is discontinued. What would be the effect on the company's overall net operating income if product H58S were dropped?
A)Overall net operating income would decrease by $137,000. 
B)Overall net operating income would increase by $137,000. 
C)Overall net operating income would decrease by $151,000. 
D)Overall net operating income would increase by $151,000.

The Management of Fannin Corporation Is Considering Dropping Product H58S