Good company is thinking of dropping division A. Current sales of division A are $100,00 units of the single product the division makes. Only division A makes this product in the company. This product sells for $25/unit and has a variable cost of $10/unit. Division A's total fixed manufacturing overhead costs are $1,000,000 with $900,000 attributable specifically to the product and $100,000 allocated to the division. Additionally, if division A is dropped the division's manager who has a salary of $70000 will be assigned to a position in division B which is currently open. If an outside manager is hired to fill in the position in division B the salary ill be $50000

If good company drops division A, what would be the effect on the income of the company?

1) none of the choices

2) income will decrease by $550,000

3)income will decrease by 1,350,000

4) income will decrease by $130,000

Butterfly company produces three products with the following per unit characteristics

Product A - price 10 - variable cost 4, 2 labour hours

Product B - price 13 - variable cost 6, 3 labour hours

Product C - price 15 - variable cost 5, 4 labour hours

1) C then B then A

2) B then a then C

3) A then B then C

4) none of the choices