Question - The management of Thermo Corporation is considering dropping product S38C. Data from the company's accounting system appear below:
Sales - $980,000
Variable expenses - 568,000
Fixed manufacturing expenses - 314,000
Fixed selling and administration expenses - 196,000
All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $280,000 of the fixed manufacturing expenses and $140,000 of the fixed selling and administrative expenses are avoidable if product S38C is discontinued.
Required: What would be the effect on the company's overall net operating income if product S38C were dropped?