The Management of Cackowski Corporation Has Been Concerned for Some

question 39

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.
-What would be the effect on the company's overall net operating income if product I11S were dropped?

• A)Overall net operating income would decrease by $46,000.
• B)Overall net operating income would increase by $93,000.
• C)Overall net operating income would increase by $46,000.
• D)Overall net operating income would decrease by $93,000.

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Definitions:

Cystectomy

A surgical operation to remove the urinary bladder.

Surgical Excision

The process of removing tissue or part of an organ by a surgical procedure.

Bladder

A hollow organ in the lower abdomen that stores urine.

Albuminuria

The presence of albumin, a type of protein, in the urine, which can be a sign of kidney disease.