Variable expenses $374,000
Fixed manufacturing expenses $245,000
Fixed selling and administrative expenses $209,000
All fixed expenses of the company are fully allocated to products in the company's accounting
system. Further investigation has revealed that $173,000 of the fixed manufacturing expenses and
$150,000 of the fixed selling and administrative expenses are avoidable if product B90D is discontinued.
What would be the effect on the company's overall net operating income if product B90D were
dropped? Should the product be dropped? Show your work!
The effect on net operating income if Product B90D is discontinued will be this:
Lost sales revenues from Product B90D ...
Given the revenue and costs of a given product, this solution illustrates the true benefit or cost of dropping it.