Asked by William Burgan on Jul 24, 2024
Verified
The management of Wengel Corporation is considering dropping product B90D.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 $173,000 of the fixed manufacturing expenses and $150,000 of the fixed selling and administrative expenses are avoidable if product B90D is discontinued.
Required:
What would be the financial advantage (disadvantage)of dropping B90D? Should the product be dropped? Show your work!
Fixed Expenses
Costs that do not change with the level of production or sales volume, such as rent, salaries, and insurance.
Financial Advantage
The benefit gained by a business or investor that puts them in a better financial position compared to competitors or the market average.
- Analyze the financial results from either adding or eliminating a product line, taking into account relevant and irrelevant costs.
Verified Answer
JB
Junace BolandJul 30, 2024
Final Answer : 
Net operating income would decline by $23,000 if product B90D were dropped.Therefore, the product should not be dropped.
Net operating income would decline by $23,000 if product B90D were dropped.Therefore, the product should not be dropped.
Learning Objectives
- Analyze the financial results from either adding or eliminating a product line, taking into account relevant and irrelevant costs.