The Management of Bercegeay Corporation Is Considering Dropping Product Y25C

question 117

Essay

The management of Bercegeay Corporation is considering dropping product Y25C. 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 $117,000 of the fixed manufacturing expenses and $78,000 of the fixed selling and administrative expenses are avoidable if product Y25C is discontinued.
Required:
a. What is the net operating income earned by product Y25C according to the company's accounting system? Show your work!
b. What would be the effect on the company's overall net operating income of dropping product Y25C? Should the product be dropped? Show your work!

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Definitions:

Public Relations

The process of handling and distributing information from an organization to the public in order to shape their perception.

Positive Relationships

Bonds between individuals that are characterized by mutual respect, affection, and trust.

Personal Selling

A sales technique involving direct interaction between a salesperson and a potential buyer to persuade the buyer to make a purchase.

Advertising

The action of calling public attention to something, particularly by paid announcements in various media channels, to promote sales.