The management of Wengel Corporation is considering dropping product B90D. Data from the company's accounting...
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Accounting
The management of Wengel Corporation is considering dropping product B90D. Data from the company's accounting system appear below:
| Sales | $ | 728,200 |
| Variable expenses | $ | 378,300 |
| Fixed manufacturing expenses | $ | 247,800 |
| Fixed selling and administrative expenses | $ | 211,400 |
All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $175,000 of the fixed manufacturing expenses and $151,700 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?
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