The Management of Bonga Corporation Is Considering Dropping Product D74F

question 194

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:

Phenylketonuria

A genetic disorder caused by a deficiency in the enzyme needed to metabolize phenylalanine, leading to intellectual disability and other health issues if untreated.

Intellectual disability

A condition characterized by significant limitations in both intellectual functioning and in adaptive behavior, originating before the age of 18.

Myelin

A fatty substance that surrounds and insulates nerve fibers, speeding up the transmission of electrical signals in the nervous system.

Fibrous tissue

A type of connective tissue that is made up of densely packed collagen fibers, providing structural support and strength to various body structures and organs.