The Management of Drummer Corporation Is Considering Dropping Product D84L

Essay

The management of Drummer Corporation is considering dropping product D84L.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 $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? Show your work!