question 500987
Aug 29, 2021 | Uncategorized
6.
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The management of Rodarmel Corporation is considering dropping product G91Q. Data from the company’s accounting system appear below:
|
|
| Sales |
|
$ |
370,000 |
|
| Variable expenses |
|
$ |
170,000 |
|
| Fixed manufacturing expenses |
|
$ |
118,000 |
|
| Fixed selling and administrative expenses |
|
$ |
89,000 |
|
|
|
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.
|
| a. |
What is the net operating income(loss) earned by product G91Q according to the company’s accounting system (Input the amount as a positive value.)
|
| (Click to select)Net operating incomeNet operating loss |
$ |
| b1. |
What would be the effect on the company’s overall net operating income of dropping product G91Q?(Input the amount as a positive value.)
|
Net operating income
(Click to select)decreasedincreased
by
|
$ |
| b2. |
Should the product be dropped? |
|
|
|
|
Yes |
|
No
Problem 2
Rothery Co. manufactures and sells medals for winners of athletic and other events. Its manufacturing plant has
the capacity to produce 18,000 medals each month; current monthly production is 17,100 medals. The company
normally charges $88 per medal. Cost data for the current level of production are shown below:
The company has just received a special one-time order for 600 medals at $73 each. For this particular order, no
variable selling and administrative costs would be incurred. This order would also have no effect on fixed costs.
Required: Should the company accept this special order? Why?
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