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Durian manufactures two products: A and B. The results of operations for year 2020 follow. Product A Product B TOTAL Units 10,000 5,000 15,000 Sales

Durian manufactures two products: A and B. The results of operations for year 2020 follow.

Product A

Product B

TOTAL

Units

10,000

5,000

15,000

Sales

$300,000

$900,000

$1,200,000

Less: Cost of goods sold

200,000

600,000

800,000

Gross margin

100,000

300,000

400,000

Less: Selling expenses

100,000

160,000

260,000

Operating income

$ 0

$140,000

$140,000

Variable manufacturing costs included in cost of goods sold amount to $11per unit for Product A and $20 per unit for Product B.

Variable selling expenses are $9 per unit for Product A and $20 per unit for Product B; remaining selling amounts are fixed.

Durian wants to drop the Product A line. If the line is dropped, company-wide fixed manufacturing costs and fixed selling costs will not change, and will all be allocated to Product B. What would be the amount of decrease on operating income if Product A is discontinued?

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