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The management of Drummer Corporation is considering dropping product D84L. Data from the company's accounting system appear below. Sales $800,000 Variable Expenses $440,000 Fixed Manufacturing Expenses $248,000 Fixed Selling and Administrative Expenses $184,000 All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $201,000 of the fixed manufacturing expenses and $156,000 of the fixed selling and administrative expenses are avoidable if product D84L is discontinued. Required: What would be the effect on the company's overall net operating income if product D84L were dropped? Should the product be dropped?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9944026

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