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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