PRACTICE DIFFERENTIAL ANALYSIS.pdf - PRACTICE DIFFERENTIAL ANALYSIS 1 Suire Corporation is considering dropping product D14E Data from the company's

PRACTICE DIFFERENTIAL ANALYSIS.pdf - PRACTICE DIFFERENTIAL...

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PRACTICE: DIFFERENTIAL ANALYSIS 1. Suire Corporation is considering dropping product D14E. Data from the company's accounting system appear below: Sales $ 790,000 $ 376,000 $ 262,000 $ 210,000 Variable expenses Fixed manufacturing expenses Fixed selling and administrative expenses All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $202,000 of the fixed manufacturing expenses and $117,000 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? 2. It may be a good decision to replace an asset before its original cost has been fully recovered through increased revenues or decreased costs. (TRUE OR FALSE) 3. Fixed costs are sunk costs. (TRUE OR FALSE) 4. Opportunity costs represent costs that can be reduced by effective management of operations. (TRUE OR FALSE) 5.A cost that will be incurred regardless of which alternative is selected is not relevant when choosing between the alternatives. (TRUE OR FALSE) 6.product whose revenues do not cover its variable costs and its traceable fixed costs should usually be dropped. (TRUE OR FALSE)

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