The Management of Schmader Corporation Is Considering Dropping Product M12C

question 38

Essay

The management of Schmader Corporation is considering dropping product M12C. Data from the company's accounting system appear below:
All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $137,000 of the fixed manufacturing expenses and $79,000 of the fixed selling and administrative expenses are avoidable if product M12C is discontinued.
Required:
a. What is the net operating income earned by product M12C according to the company's accounting system? Show your work!
b. Determine the financial advantage (disadvantage) for the company of dropping product M12C. Should the product be dropped? Show your work!

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Definitions:

Prejudice

Preconceived opinion that is not based on reason or actual experience; bias, often towards an individual or group.

Negative Attitude

A predisposition to perceive, interpret, or act towards a particular aspect of one’s environment in an unfavorable or detrimental manner.

Unarmed Suspects

Individuals suspected of a crime who are not in possession of any weapons.

Gender Prejudice

Preconceived opinions or judgments about an individual or group based on gender, often leading to discrimination or inequality.