Question
5. A company has three product lines, one of which reflects the following results: Sales $215,000 Variable expenses (125,000) Contribution margin 90,000 Fixed expenses (130,000)
5. A company has three product lines, one of which reflects the following results: Sales $215,000 Variable expenses (125,000) Contribution margin 90,000 Fixed expenses (130,000) Net loss $(40,000) If this product line is eliminated, 60% of the fixed expenses can be eliminated and the other 40% will be allocated to other product lines. If management decides to eliminate this product line, the companys net income will a) increase by $40,000. b) decrease by $90,000. c) decrease by $12,000. d) increase by $12,000.Can you please show me the work? Please.
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