Tjelmeland Corporation Is Considering Dropping Product S85U

question 116

Essay

Tjelmeland Corporation is considering dropping product S85U.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 $55,000 of the fixed manufacturing expenses and $71,000 of the fixed selling and administrative expenses are avoidable if product S85U is discontinued.
Required:
a.According to the company's accounting system,what is the net operating income earned by product S85U? Show your work!
b.What would be the effect on the company's overall net operating income of dropping product S85U? Should the product be dropped? Show your work!

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Definitions:

Joint Capsules

Structures that enclose the ends of bones, creating a lubricated space for joint movement and stability.

Smooth Muscle

Involuntary muscle tissue that lacks transverse striations; found mainly in sheets surrounding hollow organs, such as the intestine. Compare with cardiac muscle and skeletal muscle.

Skeletal Muscle

The voluntary striated muscle of vertebrates, so called because it usually is directly or indirectly attached to some part of the skeleton. Compare with cardiac muscle and smooth muscle.

Gap Junctions

Specialized intercellular connections that facilitate the direct transfer of ions and molecules between the cytoplasm of adjacent cells, enabling communication and coordination.