1. Keep or Drop a Product Line: Cainas Company CPAs is a regional accounting firm that offers audit, tax, and consulting services. The partners are concerned about the profitability of their audit business, and a closure decision might be forthcoming. Facts known are as follows:

• If the firm drops it audit work, it might do more tax work. Only 30% of the fixed costs associated with auditing disappear by dropping the audit function.
• More tax work can increase revenues by 40%, but the variable costs for tax work will also increase by 40%.
• The consulting practice will remain intact with no changes planned. The following income statements for each line of business are below:

	Auditing	Tax	Consulting
Sales	300,000	500,000	600,000
Variable costs	250,000	300,000	350,000
Fixed Costs	50,000	60,000	80,000
Net income	-	140,000	170,000

1. Compute net income if the firm decides to keep audit (make no adjustments).