A study has been conducted to determine if Product A should be dropped. Sales of the product total $200,000 per year; variable expenses total $140,000 per year. Fixed cost charged to the product total $90,000 per year. The company estimates that $65,000 of these fixed costs can be avoided if the product is dropped .These data indicate that if Product A is dropped, the company's overall net operating income would:

Select one:

a. decrease by $5,000 per year

b. increase by $20,000 per year

c. increase by $5,000 per year

d. decrease by $30,000 per year

Alex Company produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 70,000 units per month is $50 variable cost and $16 fixed cost. Alex Company is currently producing and selling only 69,000 units at selling price $80 per unit. An order has been received from an overseas customer for 1,500 units to be delivered this month at price $65 per unit. If the special offer is accepted, the contribution margin lost of normal sales is:

Select one:

a. $15,000

b. Zero

c. $45,000

d. $22,500