4. Jordan Corporation is considering dropping product W22T. Data from the company’s accounting system appear below:
Sales
Variable expenses
$650,000 $234,000 $206,000
Fixed manufacturing expenses
Fixed selling and administrative expenses $170,000
All fixed expenses of the company are fully allocated to products in the company’s accounting system. Further investigation has revealed that $125,000 of the fixed manufacturing expenses and $114,000 of the fixed selling and administrative expenses are avoidable if product W22T is discontinued.
What would be the effect on the company’s overall net operating income of dropping product W22T?
