Nutall Corporation is considering dropping product N28X. Data from the company’s accounting system appear below:
Sales $ 830,000
Variable expense $ 416,000
Fixed manufacturing expenses $ 266,000
Fixed selling and administrative expense $ 214,000
All fixed expenses of the company are fully allocated to products in the company’s accounting system. Further investigation has revealed that $204,000 of the fixed manufacturing expenses and $119,000 of the fixed selling and administrative expenses are avoidable if product N28X is discontinued.
Required:
a.
According to the company’s accounting system, what is the net operating income earned by product N28X? (Input the amount as a positive value. Omit the “$” sign in your response.)
$
b-1.
What would be the effect on the company’s overall net operating income of dropping product N28X? (Input the amount as a positive value. Omit the “$” sign in your response.)
Net operating income would be by $ .
b-2.
Should the product be dropped?
Yes or No?