Costabile Corporation is considering dropping product G41O. 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 $117,000 of the fixed manufacturing expenses and $46,000 of the fixed selling and administrative expenses are avoidable if product G41O is discontinued.
Required:
a. According to the company's accounting system, what is the net operating income earned by product G41O? Show your work!
b. What would be the effect on the company's overall net operating income of dropping product G41O? Should the product be dropped? Show your work!

Question

Costabile Corporation is considering dropping product G41O. 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 $117,000 of the fixed manufacturing expenses and $46,000 of the fixed selling and administrative expenses are avoidable if product G41O is discontinued.
Required:
a. According to the company's accounting system, what is the net operating income earned by product G41O? Show your work!
b. What would be the effect on the company's overall net operating income of dropping product G41O? Should the product be dropped? Show your work!

Quizplus · Accepted Answer

The Answer of Costabile Corporation is considering dropping product G41O. 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 $117,000 of the fixed manufacturing expenses and $46,000 of the fixed selling and administrative expenses are avoidable if product G41O is discontinued.
Required:
a. According to the company's accounting system, what is the net operating income earned by product G41O? Show your work!
b. What would be the effect on the company's overall net operating income of dropping product G41O? Should the product be dropped? Show your work!

Costabile Corporation Is Considering Dropping Product G41O