Benace Parts and Supply makes a variety of car parts. The company produces 6,000

Question

Benace Parts and Supply makes a variety of car parts. The company produces 6,000 A90 parts each year. Each A90 sells for $7 and has a contribution margin of $2. Currently, $16,000 of fixed manufacturing overhead is allocated to the A90 product line. If Benace Parts and Supply discontinues the A90 product line, $7,000 of fixed manufacturing overhead costs would be avoided. What would be the impact on total operating income if the A90 product line were to be discontinued?

Select one:

a. Increase in total operating income of $5,000

b. Decrease in total operating income of $5,000

c. Increase in total operating income of $4,000

d. Decrease in total operating income of $4,000

Explanation / Answer

a. Increase in total operating income of $5,000

loss=4,000

fixed cost=9,000

a. Increase in total operating income of $5,000

Related Questions

Navigate

• Browse (All)
• Browse B
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.