Question
Cecil Company presently has three product lines: papers, stamps, and computer ribbons. The company is profitable overall but is considering discontinuing the stamp line because
Cecil Company presently has three product lines: papers, stamps, and computer ribbons. The company is profitable overall but is considering discontinuing the stamp line because of losses from that line. Current data on the stamp line is as follows:
Sales revenue- $27,000
variable costs- $19,000
direct avoidable fixed costs- $5,000
indirect allocated fixed costs- $6,000
Net income (loss) on stamp line- $(3,000)
Given this info, if Cecil discontinues the stamp line, overall net income for the company would:
A. Increase by $3,000
B. decrease by $3,000
C. Decrease by $6,000
D. Decrease by $8,000
E. None of the above
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