The Management of Bonga Corporation Is Considering Dropping Product D74F

question 2

Multiple Choice

The management of Bonga Corporation is considering dropping product D74F. Data from the company's accounting system for this product for last year appear below: 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.
What would be the financial advantage (disadvantage) from dropping product D74F?

• A) $226,000
• B) $58,000
• C) ($226,000)
• D) ($58,000)

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Definitions:

Corporate Debts

Obligations that a corporation owes to creditors, which can include bank loans, bonds, and other forms of borrowing.

Revised Act

A legal document that has been updated or amended from its original version to reflect changes in the law or practice.

Incorporators

Individuals who prepare and sign the articles of incorporation for a new corporation, formally establishing the entity.

Certificate

A document verifying the ownership or status of something, often used in legal, academic, or financial contexts.