Costabile Corporation Is Considering Dropping Product G41O

question 176

Essay

Costabile Corporation is considering dropping product G41O. 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 $46,000 of the fixed selling and administrative expenses are avoidable if product G41O is discontinued.
Required:
a. According to the company's accounting system, what is the net operating income earned by product G41O? Show your work!
b. What would be the effect on the company's overall net operating income of dropping product G41O? Should the product be dropped? Show your work!

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Definitions:

Spalling

The process where surface layers of a material break off in flakes or scales, often due to mechanical stress or corrosion.

Strobe Light

A flash lamp that produces regular flashes of light, used for signaling, in photography, or for creating special effects.

Electronic Inclinometer

An electronic inclinometer is a sensor or instrument used for measuring angles of slope, elevation, or depression of an object with respect to gravity's direction.

Balance Sensor

A device used to measure the balance or imbalance in systems or components, often utilized in automotive and industrial applications to ensure proper operation.