Explore BrainMass
Share

Bonga Corp: company's overall net operating income

This content was STOLEN from BrainMass.com - View the original, and get the already-completed solution here!

The management of Bonga Corporation is considering dropping product D74F. Data from the company's accounting system appear below:

Sales $760,000
Variable expenses $480,000
Fixed manufacturing expenses $266,000
Fixed selling and administrative expenses $312,000

All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $107,000 of the fixed manufacturing expenses and $97,000 of the fixed selling and administrative expenses are avoidable if product D74F is discontinued.
What would be the effect on the company's overall net operating income if product D74F were dropped?

Overall net operating income would increase by $76,000.
Overall net operating income would decrease by $76,000.
Overall net operating income would increase by $298,000.
Overall net operating income would decrease by $298,000.

© BrainMass Inc. brainmass.com October 16, 2018, 10:11 pm ad1c9bdddf
https://brainmass.com/business/accounting/bonga-corp-company-s-overall-net-operating-income-211974
$2.19
Similar Posting

Calculate change in operating income if a product is dropped.

1. The Draper Company is considering dropping its Doombug toy due to continuing losses. Revenue and costs data on the toy for the past year follow:

Sales of 15,000 units $150,000
less Variable expenses $120,000
= Contribution margin $30,000
less Fixed expenses $40,000
= Net operating loss ($10,000)

If the toy were discontinued, then Draper could avoid $8,000 per year in fixed costs.

Under the given conditions, the change in annual operating income from discontinuing the production and sale of Doombugs would be:
$30,000 decrease
$10,000 increase
$22,000 decrease
$18,000 increase

2. The management of Bonga Corporation is considering dropping product D74F. Data from the company's accounting system appear below:

Sales $830,000
Variable expenses $390,000
Fixed manufacturing expenses $266,000
Fixed selling and administrative expenses $232,000

All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $111,000 of the fixed manufacturing expenses and $103,000 of the fixed selling and administrative expenses are avoidable if product D74F is discontinued.

According to the company's accounting system, what is the net operating income earned by product D74F?
($58,000)
($440,000)
$58,000
$440,000

View Full Posting Details