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adelina 88
1 month ago
9

The management of Woznick Corporation has been concerned for some time with the financial performance of its product V86O and ha

s considered discontinuing it on several occasions. Data from the company's accounting systemfor this product for last year appear below:
Sales $ 150,000
Variable expenses $ 72,000
Fixed manufacturing expenses $ 50,000
Fixed selling and administrative expenses $ 33,000
In the company's accounting system all fixed expenses of the company are fully allocated to products. Further investigation has revealed that $30,000 of the fixed manufacturing expenses and $13,000 of the fixed selling and administrative expenses are avoidable if product V86O is discontinued.
What would be the financial advantage (disadvantage) from dropping product V86O?
a. ($35,000)
b. ($5,000)
c. $35,000
d. $5,000
Business
1 answer:
Mariulka [3.8K]1 month ago
6 0

Answer:a. ($35,000)

Explanation:The analysis of the financial outcomes for discontinuing product V860 is shown here:

= Sales Revenue - Variable Costs - Avoidable Fixed Manufacturing Expenses - Avoidable Fixed Selling Expenses

= $150,000 - $72,000 - $30,000 - $13,000

= $35,000

This $35,000 represents a financial disadvantage, and fixed costs should not be factored since they are not relevant for decision-making purposes

Therefore, the appropriate option is a

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