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Question - The management of Wengel Corporation is considering dropping product B90D. Data from the company's accounting system appear below:
Sales $824,300
Variable expenses $428,200
Fixed manufacturing expenses $280,000
Fixed selling and administrative expenses $239,000
All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $198,000 of the fixed manufacturing expenses and $171,700 of the fixed selling and administrative expenses are avoidable if product B90D is discontinued.
Required -
1. What would be the financial advantage (disadvantage) of dropping B90D?
2. Should B90D be dropped?
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