The management of Austin Corporation is considering dropping product A1B2. Data from the companys budget...
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Accounting
The management of Austin Corporation is considering dropping product A1B2. Data from the companys budget for the upcoming year appear below:
| Sales | $ | 970,000 |
| Variable expenses | $ | 401,000 |
| Fixed manufacturing expenses | $ | 383,000 |
| Fixed selling and administrative expenses | $ | 263,000 |
In the company's accounting system all fixed expenses of the company are fully allocated to products. Further investigation has revealed that $259,000 of the fixed manufacturing expenses and $220,000 of the fixed selling and administrative expenses are avoidable if product A1B2 is discontinued. The financial advantage (disadvantage) for the company of eliminating this product for the upcoming year would be:
Multiple Choice
$(77,000)
$90,000
$(90,000)
$77,000
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