Jay Corp fully allocates fixed expenses to its products and had the following results for...
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Accounting
Jay Corp fully allocates fixed expenses to its products and had the following results for product x:
Sales 400
Variable expenses 320
Fixed manufacturing expenses 80
Fixed Selling & Admin exp 50
Operating income/loss -50
$60 of fixed manufacturing costs and $40 of fixed selling and administrative costs are avoidable if product x is discontinued. The remaining fixed manufacturing costs will not go away.
What is the financial impact of discontinuing product x?
Should Jay keep or discontinue product x?
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