The management of Schmader Corporation is considering droppingproduct M12C. Data from the company's accounting systemappear below:
sales....................................................................$550,000
variableexpenses.............................................$242,000
fixed manufacturingexpenses.......................$215,000
fixed selling and administrative expenses....$132,000
all fixed expenses of the company are fully allocated to productsin the company's accounting system., Further investigationhas revealed that $137,000 of the fixed manufacturing expenses and$79,000 of the fixed selling and administrative expenses areavoidable if product M12C is discontinued.
Required:
a. What is the net operating income earned by product m12Caccording to the company's accounting system? Show work
b. What would be the effect on the company's overall netoperating income of dropping product M12C? Should the product bedropped? Show work