Asked by
Sarah Schollmeier
on Oct 10, 2024
Verified
The management of Furrow Corporation is considering dropping product L07E.Data from the company's budget for the upcoming year appear below: 
In the company's accounting system all fixed expenses of the company are fully allocated to products.Further investigation has revealed that $186,000 of the fixed manufacturing expenses and $106,000 of the fixed selling and administrative expenses are avoidable if product L07E is discontinued.The financial advantage (disadvantage) for the company of eliminating this product for the upcoming year would be:
A) $8,000
B) ($173,000)
C) ($8,000)
D) $173,000
Fixed Manufacturing Expenses
These are the expenses that remain constant regardless of the amount of goods produced, including rent for factory buildings or lease payments for manufacturing equipment.
Fixed Selling
Expenses that remain constant regardless of the level of sales or production, such as salaries of sales managers and rental charges of retail spaces.
Eliminating Product
The process of removing a product from a company's offerings, often due to low sales, obsolescence, or strategic repositioning.
- Investigate the impact on the corporation's aggregate net operating income following the discontinuation of a product or department.
Verified Answer
CJ
Learning Objectives
- Investigate the impact on the corporation's aggregate net operating income following the discontinuation of a product or department.