Nutall Corporation Is Considering Dropping Product N28X

Essay

Nutall Corporation is considering dropping product N28X. 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 $199,000 of the fixed manufacturing expenses and $114,000 of the fixed selling and administrative expenses are avoidable if product N28X is discontinued.
Required:
a. According to the company's accounting system, what is the net operating income earned by product N28X? Show your work!
b. What would be the effect on the company's overall net operating income of dropping product N28X? Should the product be dropped? Show your work!