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