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!
Definitions:
Good News
Positive developments or information that can positively affect a company's market perception, stock price, or operational success.
Bad News
Information that is unfavorable or indicates negative developments.
CSR Efforts
Initiatives undertaken by a company to operate in an economically, socially, and environmentally sustainable manner.
Renewable Sources
Sources of energy that are replenished naturally, such as solar, wind, and hydroelectric power.
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