The Management of Wengel Corporation Is Considering Dropping Product B90D

question 283

Essay

The management of Wengel Corporation is considering dropping product B90D. 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 $173,000 of the fixed manufacturing expenses and $150,000 of the fixed selling and administrative expenses are avoidable if product B90D is discontinued.Required:What would be the financial advantage (disadvantage) of dropping B90D? Should the product be dropped?

---

Definitions:

Consolidation Worksheet

A tool used by accountants to combine the financial statements of a parent company with its subsidiaries, leading to consolidated financial statements.

Intragroup Sales

Intragroup sales involve transactions of goods or services between companies within the same corporate group, impacting consolidated financial statements.

Non-controlling Interest

A shareholder's equity in a portion of a subsidiary that is not owned, directly or indirectly, by the company which owns more than half of the subsidiary.

Consolidated Group

A group of companies composed of a parent and its subsidiaries, whose financial statements are prepared as one entity.