Suire Corporation is considering dropping product D14E. Data from the company's accounting system appear below:
Sales $ 800,000
Variable expenses $ 381,000
Fixed manufacturing expenses $ 263,000
Fixed selling and administrative expenses $ 211,000
All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $202,500 of the fixed manufacturing expenses and $117,500 of the fixed selling and administrative expenses are avoidable if product D14E is discontinued.
Required:
a. According to the company's accounting system, what is the net operating income earned by product D14E? (Net losses should be indicated by a minus sign.)
b. What would be the financial advantage (disadvantage) of dropping product D14E? Should the product be dropped?
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