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Papago Company produces three versions of its most popular product: Small, Medium, and Large. A condensed segmented income statement for a recent period follows:
Papago Company produces three versions of its most popular product: Small, Medium, and Large. A condensed segmented income statement for a recent period follows: Small Medium Large Total Sales $1,000,000 $400,000 $130,000 $1,530,000 Variable expenses 650,000 280,000 116.000 1,046,000 Contribution margin 350,000 120,000 14,000 484,000 Fixed expenses 150,000 70,000 44,000 264,000 Net income (loss) $200.000 $50,000 $130,000) $220,000 Assume that 20% of the fixed expenses for the Large line are avoidable. Should Papago eliminate the Large line, why or why not? O Yes, because the company's net income will increase by $21,200. Yes, because the company's net income will increase by $24,000. O No, because the company's net income will decrease by $5,200. No, because the company's net income will decrease by $14,000.
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