Question
Lenovo Inc. is considering discontinuing their Thinkpad laptop division, because it is reporting a loss. Currently, Thinkpad is generating sales of $200,000, with variable costs
Lenovo Inc. is considering discontinuing their Thinkpad laptop division, because it is reporting a loss. Currently, Thinkpad is generating sales of $200,000, with variable costs of $150,000 and
fixed costs of $80,000. Therefore, it is reporting a loss of $30,000. Is Lenovo correct in discontinuing the Thinkpad division?
a.Yes, because the companys net income will increase by $30,000 if discontinued
b. No, because the companys net income will decrease by $25,000 if discontinued
c. No, because the companys net income will decrease by $50,000 if discontinued
d. Yes, because the Thinkpad is an awful laptop
e. None of the above
Please explain why
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