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 was discontinued.These data indicate that if Product A is discontinued,the company's overall net operating income would:
A)decrease by $60,000 per month
B)increase by $10,000 per month
C)increase by $20,000 per month
D)decrease by $20,000 per month

Question

Quizplus · Accepted Answer

If Product A is discontinued, the company's overall net operating income would decrease by $60,000 per month because the company would lose the $150,000 in revenue from Product A and would only save $70,000 in fixed expenses.

Lusk Company Produces and Sells 15,000 Units of Product a Each