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Bingham Company manufactures and sells Product 3. Results for last year for the manufacture and sale of Product are as follows: Sales (10,000 units at
Bingham Company manufactures and sells Product 3. Results for last year for the manufacture and sale of Product are as follows: Sales (10,000 units at $160 each) $1,600,000 Less: Costs: Variable Production Costs $960,000 Sales Commissions-15% of Sales $240,000 Salaries of Line Supervisors $195,000 Traceable Fixed Advertising Expense $180,000 Fixed General Factory Overhead (Allocated to Products on the Basis of Square $170,000 Metres Occupied) Total Costs $1.745,000 Operating Income (Loss) ($145,000) Bingham Company anticipates no change in the operating result for Product in the foreseeable future if the product is produced. Bingham is re-examining all of its products and is trying to decide whether or not to discontinue the manufacture and sale of Product J. The company's total fixed factory overhead cost would not be affected by this decision Assume that discontinuing the manufacture and sale of Product will not affect the sale of other products. If the company discontinues Product J, what will be the change in annual operating income due to this decision? $25.000 decrease O $145.000 increase
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