Nutall Corporation is considering dropping product N28X. Data from the company’s accounting system appear below:
|
Sales |
$ 650,000 |
|
Variable expense |
$ 280,000 |
|
Fixed manufacturing expenses |
$ 242,000 |
|
Fixed selling and administrative expense |
$ 190,000 |
All fixed expenses of the company are fully allocated to products in the company’s accounting system. Further investigation has revealed that $195,000 of the fixed manufacturing expenses and $110,000 of the fixed selling and administrative expenses are avoidable if product N28X is discontinued.
Required:
a. According to the company’s accounting system, what is the net operating income earned by product N28X? (Input the amount as a positive value. Omit the “$” 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?