Question

2) Balser Corporation manufactures and sells a number of products, including a pro TYMP. Results for last year for the manufacture and sale of JYMPs are as follows: ading a product called Sales Less expenses: $ 960,000 Variable production costs Sales commissions $ 464,000 Salary of product manager 144,000 100,000 Fixed product advertising 160,000 Fixed manufacturing overhead 132,000 1,000,000 Net operating loss $ (40,000) Balser is trying to decide whether to discontinue the manufacture scontinue the manufacture and sale of JYMPs. All expenses other than fixed manufacturing overhead are 1xed manufacturing overhead are avoidable if the product is dropped. None of the fixed manufacturing overhead is avoidable. Assume that dropping Product JYMP would re ne that dropping Product JYMP would result in a $90,000 increase in the contribution 1 of other products. If Balser chooses to discontinue JYMP, the annual financial advantage (disadvantage) of eliminating this product should be: A) ($40,000) B) $40,000 C) ($2,000) D) $50,000

Answer 1

All of the Costs are avoolal le eupt Focal manuk auturi overheads $13a000 are ahle to Coue up thes J we eripenoli ture tuen fhere will be be no benefit and te mo less of drupping2 produet Ho The praduct JYMP has bun dronpiol nddue fo this contribution inruasod there oill be no Badirecty OJYPm proolut Toted bentit of dropping JyPMm is 130000 $9o000 +uooo0) $90000 loss ofi gu0ooo $132000 un avoidob le Expenes Finandal aduatoge ((distoolvaudase) of duo ppin JYPM produtt 132000) $130000 C2000)