5. Lusk Corporation produces and sells 16,200 units of Product X each month. The

Q: 5. Lusk Corporation produces and sells 16,200 units of Product X each month. The

Hence if product X is discontinued;decrease in net operating income=(72000-14800)=$57200 per month. Current Proposed Sales (16200*32)=$518400 0 Less:Variable expenses (16200*26)=$421200 0 Contribution margin $97200 0 Less:Fixed expenses $112000 $72000 Net operating income ($14800) ($72000)

ID: 2396696 • Letter: 5

Question

5. Lusk Corporation produces and sells 16,200 units of Product X each month. The selling price of Product X is $32 per unit, and variable expenses are $26 per unit. A study has been made concerning whether Product X should be discontinued. The study shows that $72,000 of the $112,000 in fixed expenses charged to Product X would not be avoidable even if the product was discontinued. If Product X is discontinued, the company's overall net operating income would: O decrease by $54,800 per month O increase by $14,800 per month increase by $54,800 per month O decrease by $57.200 per month

Explanation / Answer

Hence if product X is discontinued;decrease in net operating income=(72000-14800)=$57200 per month.

Current Proposed Sales (16200*32)=$518400 0 Less:Variable expenses (16200*26)=$421200 0 Contribution margin $97200 0 Less:Fixed expenses $112000 $72000 Net operating income ($14800) ($72000)

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5. Lusk Corporation produces and sells 16,200 units of Product X each month. The

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