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3. Question :
(TCO D) Tjelmeland Corporation is considering dropping product S85U. Data from the
company's accounting system appear below.
Sales
$360,000
Variable Expenses
$158,000
Fixed Manufacturing Expenses
$119,000
Fixed Selling and Administrative Expenses
$94,000

All fixed expenses of the company are fully allocated to products in the company's
accounting system. Further investigation has revealed that $55,000 of the fixed
manufacturing expenses and $71,000 of the fixed selling and administrative expenses are
avoidable if product S85U is discontinued.
Required:
i. According to the company's accounting system, what is the net operating income earned by
product S85U? Show your work!
ii. What would be the effect on the company's overall net operating income of dropping
product S85U? Should the product be dropped? Show your work!
4. Question :
(TCO D) Fouch Company makes 30,000 units per year of a part it uses in the products it
manufactures. The unit product cost of this part is computed as follows.
Direct Materials
$15.70
Direct Labor