The Draper Corporation Is Considering Dropping Its Doombug Toy Due

question 185

Multiple Choice

The Draper Corporation is considering dropping its Doombug toy due to continuing losses. Data on the toy for the past year follow:
If the toy were discontinued, Draper could avoid $8,000 per year in fixed costs. The remainder of the fixed costs are not avoidable.
-The annual financial advantage (disadvantage) for the company from discontinuing the production and sale of Doombugs would be:

• A) ($30,000)
• B) $10,000
• C) ($22,000)
• D) $18,000

---

Definitions:

Job P513

A specific project, order, or batch identified by the code P513 within a job costing system.

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead to individual jobs or products.

Direct Labor-Hour

An indicator of the cumulative hours employees dedicated to the manufacturing process have worked.

Estimated Total Manufacturing Overhead

The projected total of all indirect costs involved in manufacturing over a specific period.