The condensed income statement for a Hayden Corp. for the past year is as follow
ID: 2478966 • Letter: T
Question
The condensed income statement for a Hayden Corp. for the past year is as follows:
Product
T
U
$680,000
$320,000
$540,000
$ 220,000
145,000
40,000
$685,000
$260,000
$ (5,000)
$ 60,000
Management is considering the discontinuance of the manufacture and sale of Product T at the beginning of the current year. The discontinuance would have no effect on the total fixed costs and expenses or on the sales of Product U. What is the amount of change in net income for the current year that will result from the discontinuance of Product T?
Product
T
U
Sales$680,000
$320,000
Costs: Variable costs$540,000
$ 220,000
Fixed costs145,000
40,000
Total costs$685,000
$260,000
Income (loss)$ (5,000)
$ 60,000
Explanation / Answer
Current Total Net Income 60000-5000 $55,000 If T is discontinued T U Sales 0 320000 Costs Variable Costs 0 220000 Fixed Costs 145000 40000 Total Costs 145000 260000 Income ( Loss) -145000 60000 Net Income = 60000-145000 ($85,000) The income will decraese by $ 140000 ( 85000+55000)
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