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baherus
5 days ago
15

Suire Corporation is considering dropping product D14E. Data from the company's accounting system appear below:

Business
1 answer:
soldi70 [3.4K]5 days ago
7 0

Answer and Explanation:

a. The calculation of the net operating income is detailed below:

Sales                          $800,000

Less: Variable cost  -$381,000

Contribution margin $419,000

Less:  Fixed manufacturing expenses - $263,000

Less: Fixed selling and administrative expenses - $211,000

Net operating income or (Loss) -$55,000

b. The analysis of the financial impact of discontinuing product D14E is as follows:

Sales                          $800,000

Less: Variable cost  -$381,000

Contribution margin $419,000

Less:  Fixed manufacturing expenses - $202,500

Less: Fixed selling and administrative expenses - $117,500

Financial disadvantage -$99,000

Since there is a financial disadvantage, the product should not be discontinued

We simply utilized the aforementioned equation

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