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?b. Determine the financial advantage (disadvantage) for the company of dropping product M12C. Should the product be dropped?
Definitions:
Consumer Ratings Magazine
Publications that evaluate and rate the quality and performance of products or services for consumer guidance.
New Automobiles
Refers to vehicles that have been recently manufactured, entering the market for the first time.
Information Value
The worth or utility derived from data that can inform decision-making or provide insights, often related to its relevance and accuracy.
Marginal Cost
The increase or decrease in the total cost of a production run for making one additional unit of an item.
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