The Management of Cackowski Corporation Has Been Concerned for Some

question 96

Multiple Choice

The management of Cackowski Corporation has been concerned for some time with the financial performance of its product I11S and has considered discontinuing it on several occasions. 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 $185,000 of the fixed manufacturing expenses and $132,000 of the fixed selling and administrative expenses are avoidable if product I11S is discontinued.

-According to the company's accounting system, what is the net operating income earned by product I11S? Include all costs in this calculation-whether relevant or not.

• A)$410,000
• B)$46,000
• C)$(46,000)
• D)$(410,000)

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Definitions:

Debit Balance

An accounting entry that indicates the amount owed by a company, typically found on the left side of a ledger.

Work in Process Inventory

The value of partially completed goods that are still in the production process at a given point in time.

Underapplied Overhead

The situation where the allocated manufacturing overhead is less than the actual overhead incurred, leading to an adjustment need in accounting records.

Adjusting Entry

An accounting journal entry made to amend the preliminary financial records before preparing financial statements.