The Management of Bonga Corporation Is Considering Dropping Product D74F

question 331

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:

Reasonable Opportunity

An equitable standard ensuring individuals have a fair chance to take action or defend themselves within a certain timeframe or under certain conditions.

Alteration

A change or modification in something, often referring to physical changes to documents or objects.

Drawer

In the context of financial instruments, the individual or entity that writes and signs a check, effectively instructing the bank to pay the specified amount to the party named or to the bearer.

Charging

The process of imposing a charge or fee for services rendered or for access to facilities or information.