Pepper€™s Automotive (see Brief Exercise 18-19) has further analyzed the exhaust system division into three products: exhaust pipes, intake valves, and intake pipes. The income statement is available below.

If intake valves were dropped, what would be the change in profits in the short run and the long run, respectively?

a. Short run: $100,000 decrease; long run: $50,000 increase

b. Short run: $150,000 increase; long run: $50,000 decrease

c. Short run: $100,000 increase; long run: $50,000 decrease

d. Short run: $50,000 increase; long run: $100,000 decrease

Transcribed Image Text:

Intake Valves Exhaust Plpes Intake Pipes Net revenues Varlable costs Contributlon margin Controllable fixed costs Controllable margin Noncontrollable fixed costs Contribution by proflt center $500,000 50,000 $300,000 $200,000 100,000 450,000 150,000 50,000 100,000 150,000 400,000 100,000 100,000 50,000 $ (50,000) $ 50,000 $300,000