The Management of Therriault Corporation Is Considering Dropping Product U51Y

Essay

The management of Therriault Corporation is considering dropping product U51Y. Data from the company's accounting system appear below: 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 U51Y is discontinued.
Required:
What would be the effect on the company's overall net operating income if product U51Y were dropped? Should the product be dropped? Show your work!