=+Proposal 2: Reduce invested assets by discontinuing a product line. This action would eliminate sales of $75,000, cost of goods sold of $35,000, and operating expenses of $37,750.

Assets of $32,500 would be transferred to other divisions at no gain or loss.

Proposal 3: Purchase new and more efficient machinery and thereby reduce the cost of goods sold by $27,000. Sales would remain unchanged, and the old machinery, which has no remaining book value, would be scrapped at no gain or loss. The new machinery would increase invested assets by $405,000 for the year.

Instructions