Question
The condensed income statement for a business for the past year is presented as follows: Product F G H TOTAL SALES $200,000 $180,000 $320,000 $700,000
The condensed income statement for a business for the past year is presented as follows:
Product | ||||
F | G | H | TOTAL | |
SALES | $200,000 | $180,000 | $320,000 | $700,000 |
LESS VARIABLE COST | 120,000 | 160,000 | 200,000 | 480,000 |
CONTRIBUTION MARGIN | $80,000 | $20,000 | $120,000 | $220,000 |
LESS FIXED COST | 25,000 | 30,000 | 40,000 | 95,000 |
INCOME (LOSS) FROM OPERATION | $55,000 | ($10,000) | $80,000 | $125,000 |
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 of in net income for the current year that will result from the discontinuance of Product G?
a. $10,000 decrease
b. $20,000 increase
c. $10,000 increase
d. $20,000 decrease
e. none of the listed responses is the correct answer
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