The Management of Zorrilla Corporation Is Considering Dropping Product R10C

question 15

Multiple Choice

The management of Zorrilla Corporation is considering dropping product R10C. 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 $42,000 of the fixed manufacturing expenses and $48,000 of the fixed selling and administrative expenses are avoidable if product R10C is discontinued.
-According to the company's accounting system, what is the net operating income earned by product R10C?

• A) ($28,000)
• B) $28,000
• C) $135,000
• D) ($135,000)

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Definitions:

Monthly Advertising Budget

A planned amount of money dedicated to promoting a company's products or services for a month.

Sales Commissions

Payments made to sales staff based on the value or volume of sales generated.

Fixed Expenses

Expenses that remain constant regardless of the amount of output or sales, including rent, salaries, and insurance costs.

Monthly Net Operating Income

The profit a company generates from its normal business operations, excluding unusual or infrequent items, on a monthly basis.