Mr. Morgan Henry, accountant for Black & Logan Co. Inc., has prepared the following product-line income data:

The following additional information is available:
The factory rent of $1,500 assigned to Product C is avoidable if the product were dropped.
The company's total depreciation would not be affected by dropping C.
Eliminating Product C will reduce the monthly utility bill from $1,500 to $800.
The supervisor's salary is avoidable.
If Product C is discontinued, the maintenance department will be able to reduce monthly expenses from $3,000 to $2,000.
Elimination of Product C will make it possible to cut two persons from the administrative staff; their combined salaries total $3,000.
Required:
Prepare an analysis showing whether Product C should be eliminated.

Question

Mr. Morgan Henry, accountant for Black & Logan Co. Inc., has prepared the following product-line income data:
  
The following additional information is available:  
The factory rent of $1,500 assigned to Product C is avoidable if the product were dropped.  
The company's total depreciation would not be affected by dropping C.  
Eliminating Product C will reduce the monthly utility bill from $1,500 to $800.  
The supervisor's salary is avoidable.  
If Product C is discontinued, the maintenance department will be able to reduce monthly expenses from $3,000 to $2,000.  
Elimination of Product C will make it possible to cut two persons from the administrative staff; their combined salaries total $3,000.
Required:
Prepare an analysis showing whether Product C should be eliminated.

Quizplus · Accepted Answer

The Answer of Mr. Morgan Henry, accountant for Black & Logan Co. Inc., has prepared the following product-line income data:
  
The following additional information is available:  
The factory rent of $1,500 assigned to Product C is avoidable if the product were dropped.  
The company's total depreciation would not be affected by dropping C.  
Eliminating Product C will reduce the monthly utility bill from $1,500 to $800.  
The supervisor's salary is avoidable.  
If Product C is discontinued, the maintenance department will be able to reduce monthly expenses from $3,000 to $2,000.  
Elimination of Product C will make it possible to cut two persons from the administrative staff; their combined salaries total $3,000.
Required:
Prepare an analysis showing whether Product C should be eliminated.

Mr Morgan Henry, Accountant for Black & Logan Co