QUESTION 8

The condensed income statement for a business for the past year is presented as follows:

Product

F

G

H

Total

Sales

$300,000

$220,000

$340,000

$860,000

Less variable costs

180,000

190,000

220,000

590,000

Contribution margin

$120,000

$ 30,000

$120,000

$270,000

Less fixed costs

50,000

50,000

40,000

140,000

Income (loss) from oper.

$ 70,000

$ (20,000)

$ 80,000

$130,000

Management is considering the discontinuance of the manufacture and sale of Product G at the beginning of the current year. The discontinuance would have no effect on the total fixed costs and expenses or on the sales of Products F and H. What is the amount of change in net income for the current year that will result from the discontinuance of Product G?

$20,000 increase

$30,000 increase

$20,000 decrease

$30,000 decrease

2 points