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The management of Rodarmel Corporation is considering dropping product G91Q. Data from the company's accounting system appear below:


Sales	$	370,000
Variable expenses	$	170,000
Fixed manufacturing expenses	$	118,000
Fixed selling and administrative expenses	$	89,000

All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $57,000 of the fixed manufacturing expenses and $40,000 of the fixed selling and administrative expenses are avoidable if product G91Q is discontinued.

Required:

a.	What is the net operating income(loss) earned by product G91Q according to the company's accounting system? (Input the amount as a positive value.)

$ by

$ [removed]

b2.

Should the product be dropped?

[removed]

Yes

[removed]

Problem 2

Rothery Co. manufactures and sells medals for winners of athletic and other events. Its manufacturing plant has
the capacity to produce 18,000 medals each month; current monthly production is 17,100 medals. The company
normally charges $88 per medal. Cost data for the current level of production are shown below:

The company has just received a special one-time order for 600 medals at $73 each. For this particular order, no
variable selling and administrative costs would be incurred. This order would also have no effect on fixed costs.
Required: Should the company accept this special order? Why?

13 years ago

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