The Management of Woznick Corporation Has Been Concerned for Some

question 29

Multiple Choice

The management of Woznick Corporation has been concerned for some time with the financial performance of its product V86O and has considered discontinuing it on several occasions. Data from the company's accounting system for this product for last year appear below:
In the company's accounting system all fixed expenses of the company are fully allocated to products. Further investigation has revealed that $30,000 of the fixed manufacturing expenses and $13,000 of the fixed selling and administrative expenses are avoidable if product V86O is discontinued.
-Assume that dropping Product JYMP would result in a $90,000 increase in the contribution margin of other products.If Balser chooses to discontinue JYMP,the annual financial advantage (disadvantage) of eliminating this product should be:

• A) ($40,000)
• B) $40,000
• C) ($2,000)
• D) $50,000

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Definitions:

Base Pay

The initial rate of compensation an employee receives, not including benefits, bonuses, raises, or other forms of supplementary pay.

Executives

Senior-level managers within an organization who are responsible for making strategic decisions and overseeing the company's operations.

Contingent Workers

Workers who are hired on a non-permanent basis, such as freelancers, consultants, or temporary contract workers.

Labour Costs

The total expenditure borne by employers for the payment of wages, benefits, and taxes associated with the employment of labor.