The Management of Fannin Corporation Is Considering Dropping Product H58S

question 93

Multiple Choice

The management of Fannin Corporation is considering dropping product H58S.Data from the company's accounting system appear below:
In the company's accounting system all fixed expenses of the company are fully allocated to products.Further investigation has revealed that $90,000 of the fixed manufacturing expenses and $42,000 of the fixed selling and administrative expenses are avoidable if product H58S is discontinued.What would be the effect on the company's overall net operating income if product H58S were dropped?

• A)Overall net operating income would decrease by $137,000.
• B)Overall net operating income would increase by $137,000.
• C)Overall net operating income would decrease by $151,000.
• D)Overall net operating income would increase by $151,000.

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Definitions:

Brachial

Pertaining to the arm, specifically the area of the upper arm close to the shoulder.

Femoral

Relating to the femur or thigh, the largest and strongest bone in the human body.

Common Iliac

Referring to the two large arteries that originate from the abdominal aorta and supply blood to the pelvic region, lower abdominal wall, and legs.

Tibial

Relating to the tibia, which is the larger and stronger of the two bones in the lower leg, extending from the knee to the ankle.