Assume that a company manufactures and sells a variety of products, one of which it refers to as Product A. The company is considering dropping Product A because the income statement for this product is reporting a net operating loss as shown below. Sales $ see,e00 Variable expenses: Variable manufacturing expenses Sales commissions $ 240,000 75,000 25,000 Shipping Total variable expenses Contribution margin Fixed expenses: Salary of product-line manager Advertising for this product General factory overhead Depreciation on equipment Insurance on this product's inventories 340.000 160,000 $ 65,000 35,000 25,000 20,000 8,000 15,000 Purchasing department Total fixed expenses 168,000 $ (8,000) Net operating loss If Product A is dropped, the company would transfer its product-line manager to another department and discontinue a search for a new manager that the company anticipated paying a salary of $51,500. The general factory overhead and purchasing department expenses are common costs that the company allocates to all of its products using total sales dollars as the allocation base. The equipment used to manufacture Product A does not wear out through use and it has no resale value. What is the financial advantage (disadvantage) of dropping Product A? Multiple Choice S45.500) $25.500 S65.500) S8.000 O O O
Assume that a company manufactures and sells a variety of products, one of which it refers to as Product A. The company is considering dropping Product A because the income statement for this product is reporting a net operating loss as shown below. Sales $ see,e00 Variable expenses: Variable manufacturing expenses Sales commissions $ 240,000 75,000 25,000 Shipping Total variable expenses Contribution margin Fixed expenses: Salary of product-line manager Advertising for this product General factory overhead Depreciation on equipment Insurance on this product's inventories 340.000 160,000 $ 65,000 35,000 25,000 20,000 8,000 15,000 Purchasing department Total fixed expenses 168,000 $ (8,000) Net operating loss If Product A is dropped, the company would transfer its product-line manager to another department and discontinue a search for a new manager that the company anticipated paying a salary of $51,500. The general factory overhead and purchasing department expenses are common costs that the company allocates to all of its products using total sales dollars as the allocation base. The equipment used to manufacture Product A does not wear out through use and it has no resale value. What is the financial advantage (disadvantage) of dropping Product A? Multiple Choice S45.500) $25.500 S65.500) S8.000 O O O
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter8: Tactical Decision-making And Relevant Analysis
Section: Chapter Questions
Problem 11MCQ: Garrett Company provided the following information: Common fixed cost totaled 46,000. Garrett...
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