The Management of Zorrilla Corporation Is Considering Dropping Product R10C

question 110

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.
-What would be the effect on the company's overall net operating income if product R10C were dropped?

• A) Overall net operating income would decrease by $28,000.
• B) Overall net operating income would decrease by $45,000.
• C) Overall net operating income would increase by $28,000.
• D) Overall net operating income would increase by $45,000.

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Definitions:

Accounting Report

Documents that summarize the financial performance and position of an entity, such as income statements and balance sheets.

SEC Approval

The official authorization from the Securities and Exchange Commission for various financial activities and filings, ensuring compliance with regulations.

Effective Accounting Information System

A system that accurately collects, records, stores, and processes financial data to produce information useful for decision-making.

Basic Principle

A foundational rule or concept that guides actions, decisions, or laws in a specific field or general context.