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