The management of Bonga Corporation is considering dropping product D74F. Data from the company's accounting system for this product for last year appear below:
Sales $ 920,000
Variable expenses $ 404,000
Fixed manufacturing expenses $ 334,000
Fixed selling and administrative expenses $ 241,000
All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $206,000 of the fixed manufacturing expenses and $117,000 of the fixed selling and administrative expenses are avoidable if product D74F is discontinued.
What would be the financial advantage (disadvantage) from dropping product D74F?
a. $193,000
b. $59,000
c. ($59,000)
d. ($193,000)
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