What is the net operating income earned by product

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Reference no: EM131212908

The management of H. Bergeron Corporation is considering dropping product Y25C. Data from the company's accounting system appear below:

Sales $610,000

Variable expenses $244,000

Fixed manufacturing expenses $226,000

Fixed selling and administrative expenses $171,000

All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $117,000 of the fixed manufacturing expenses and $78,000 of the fixed selling and administrative expenses are avoidable if product Y25C is discontinued.

a. What is the net operating income earned by product Y25C according to the company's accounting system? Show your supporting calculations.

b. What would be the effect on the company's overall net operating income of dropping product Y25C? Should the product be dropped? Show your supporting calculations.

Reference no: EM131212908

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