Acc505 Managerial Accounting: (TCO D) The management of Drummer Corporation dropping product D84L

Acc505 Managerial Accounting
Week 6

(TCO D) The management of Drummer Corporation is considering dropping product D84L. Data from the company's accounting system appear below.
Sales $800,000
Variable Expenses $440,000
Fixed Manufacturing Expenses $248,000
Fixed Selling and Administrative Expenses $184,000

All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $201,000 of the fixed manufacturing expenses and $156,000 of the fixed selling and administrative expenses are avoidable if product D84L is discontinued.

Required:
What would be the effect on the company's overall net operating income if product D84L were dropped? Should the product be dropped? Show your work!

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