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Abba, Inc. is considering dropping a product line. During the prior year, the line had sales of $207,000 and a contribution margin of $124,000. Fixed
Abba, Inc. is considering dropping a product line. During the prior year, the line had sales of $207,000 and a contribution margin of $124,000. Fixed expenses consist of: Salaries $60,000 Rent 50,000 Advertising 20,000 Administrative 35,000 Total xed expenses $165,000 The product line manager's $60,000 salary if the product line is dropped is avoidable as is the advertising. or the administrative expenses. $10,000 is avoidable if the product line were dropped. The rest are general allocated expenses that will not change if the product is dropped. The rent expense is allocated to product lines based on sales and represents a share of the total cost for the building. If this product line were dropped, what would happen to the company's overall net income? C) Overall net income would increase by $16,000. C) Overall net income would increase by $41,000. 0 Overall net income would decrease by $34,000. 0 Overall net income would decrease by $124,000. In
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