The Management of Drummer Corporation Is Considering Dropping Product D84L

question 11

Essay

The management of Drummer Corporation is considering dropping product D84L.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 $201,000 of the fixed manufacturing expenses and $156,000 of the fixed selling and administrative expenses are avoidable if product D84L is discontinued.
Required:
What would be the effect on the company's overall net operating income if product D84L were dropped? Should the product be dropped? Show your work!

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Definitions:

Sample Statistic s

Calculated value (such as mean or standard deviation) from a sample of data, used to infer characteristics of the entire population.

Standard Error

A measure of the statistical accuracy of an estimate, calculated as the standard deviation of the sampling distribution of a statistic.

Probability Distribution

A function that describes the likelihood of different outcomes in an experiment.

Sample Mean

The average value of all the measurements in a sample, calculated by adding all the values and dividing by the number of observations.