A Study Has Been Conducted to Determine If Product a Should
A study has been conducted to determine if Product A should be dropped.Total sales of the product are $200,000 per year;total variable expenses are $140,000 per year.Total fixed expenses charged to the product are $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 operating income per year would change by how much?
A) A decrease of $10,000.
B) An increase of $20,000.
C) A decrease of $20,000.
D) An increase of $30,000.Add avoidable costs (90,000 - 40,000)= $50,000.Operating Income decreased by $10,000.