Problem
The management of Heider Corporation is considering dropping product J14V. Data from the company's accounting system appear below:
|
Sales
|
$940,000
|
|
Variable expenses
|
$379,000
|
|
Fixed manufacturing expenses
|
$361,000
|
|
Fixed selling and administrative expenses
|
$241,000
|
In the company's accounting system all fixed expenses of the company are fully allocated to products. Further investigation has revealed that $215,000 of the fixed manufacturing expenses and $176,000 of the fixed selling and administrative expenses are avoidable if product J14V is discontinued. What would be the effect on the company's overall net operating income if product J14V were dropped?