Q 30

A study has been conducted to determine if Product A should be dropped.Sales of the product total $200,000 per year;variable expenses total $140,000 per year.Fixed expenses charged to the product total $90,000 per year.The company estimates that $40,000 of these fixed expenses will continue even if the product is dropped.These data indicate that if Product A is dropped,the company's overall net operating income would:
A) decrease by $10,000 per year.
B) increase by $20,000 per year.
C) decrease by $20,000 per year.
D) increase by $30,000 per year.

Q 31

Lusk Company produces and sells 15,000 units of Product A each month.The selling price of Product A is $20 per unit,and variable expenses are $14 per unit.A study has been made concerning whether Product A should be discontinued.The study shows that $70,000 of the $100,000 in fixed expenses charged to Product A would continue even if the product were discontinued.These data indicate that if Product A is discontinued,the company's overall net operating income would:
A) increase by $10,000 per month.
B) decrease by $20,000 per month.
C) increase by $20,000 per month.
D) decrease by $60,000 per month.

Q 32

Manor Company plans to discontinue a department that has a contribution margin of $24,000 and $48,000 in fixed costs.Of the fixed costs,$21,000 cannot be avoided.The effect of this discontinuance on Manor's overall net operating income would be a(an):
A) decrease of $3,000.
B) increase of $3,000.
C) decrease of $24,000.
D) increase of $24,000.