Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A company is considering closing one of its product lines. Current data on the product line are as follows: Sales revenue $50,000 Variable costs (36,000)

A company is considering closing one of its product lines. Current data on the product line are as follows:

Sales revenue $50,000
Variable costs (36,000)
Direct avoidable fixed costs (9,000)
Indirect allocated fixed costs (7,000)
Net income (loss) on the product line ($2,000)

The direct avoidable fixed costs will be eliminated if the product line is closed. The indirect allocated fixed costs will remain the same whether the product line is continued or closed.

By how much will overall company net income change if this company decides to discontinue this product line?

  • It will increase by $2,000.
  • It will decrease by $2,000.
  • It will increase by $5,000.
  • It will decrease by $5,000.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

External Quality Audit Has It Improved Quality Assurance In Universities

Authors: Mahsood Shah, Chenicheri Sid Nair

1st Edition

1843346761, 978-1843346760

More Books

Students also viewed these Accounting questions