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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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