In the company's accounting system all fixed expenses of the company are fully allocated to products. Further investigation has revealed that $211,000 of the fixed manufacturing expenses and $172,000 of the fixed selling and administrative expenses are avoidable if product J14V is discontinued. What would be the effect on the company's overall net operating income if product J14V were dropped?

Question

Business

Nathalia Pace

26 October, 10:19

In the company's accounting system all fixed expenses of the company are fully allocated to products. Further investigation has revealed that $211,000 of the fixed manufacturing expenses and $172,000 of the fixed selling and administrative expenses are avoidable if product J14V is discontinued. What would be the effect on the company's overall net operating income if product J14V were dropped?

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Answers (1)

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Mcintosh · Answer 1

Overall net income would increase by 55,000

Explanation:

Overall net income would increase by 55,000

J14V Profit = $920,000 - $377,000 - $359,000-$239,000

= $-55,000

Therfore what would be the effect on the company's overall net operating income if product J14V were dropped is that the Overall net income would increase by 55,000