The management of Marvel Corporation has been concerned for some time with the financial performance of its product EX123 and has considered discontinuing it on several occasions. Data from the company's accounting system appear below:
$\begin{array}{llr}
\text { Sales } &\$650,000\
\text { Cost of goods sold } &\$293,000\
\text {Building expenses } &\$221,000\
\text { Selling and administrative expenses } &\$150,000\
\end{array}$

In the company's accounting system all building expenses of the company are fully allocated to products. Further investigation has revealed that $95,000 of the building expenses and $85,000 of the selling and administrative expenses will not be incurred if product EX123 is discontinued.
a. According to the company's accounting system, what are the operating profits (losses) earned by product EX123?
b. What would be the effect on the company's overall operating profits if product EX123 is dropped?

Question

The management of Marvel Corporation has been concerned for some time with the financial performance of its product EX123 and has considered discontinuing it on several occasions. Data from the company's accounting system appear below:
 $\begin{array}{llr}
  \text { Sales } &\$650,000\
 \text { Cost of goods sold } &\$293,000\
 \text {Building expenses  } &\$221,000\
 \text { Selling and administrative expenses } &\$150,000\
\end{array}$
 
In the company's accounting system all building expenses of the company are fully allocated to products. Further investigation has revealed that $95,000 of the building expenses and $85,000 of the selling and administrative expenses will not be incurred if product EX123 is discontinued.
a. According to the company's accounting system, what are the operating profits (losses) earned by product EX123?
b. What would be the effect on the company's overall operating profits if product EX123 is dropped?

Quizplus · Accepted Answer

The Answer of The management of Marvel Corporation has been concerned for some time with the financial performance of its product EX123 and has considered discontinuing it on several occasions. Data from the company's accounting system appear below:
 $\begin{array}{llr}
  \text { Sales } &\$650,000\
 \text { Cost of goods sold } &\$293,000\
 \text {Building expenses  } &\$221,000\
 \text { Selling and administrative expenses } &\$150,000\
\end{array}$
 
In the company's accounting system all building expenses of the company are fully allocated to products. Further investigation has revealed that $95,000 of the building expenses and $85,000 of the selling and administrative expenses will not be incurred if product EX123 is discontinued.
a. According to the company's accounting system, what are the operating profits (losses) earned by product EX123?
b. What would be the effect on the company's overall operating profits if product EX123 is dropped?

The Management of Marvel Corporation Has Been Concerned for Some