Able Company manufactures and sells 20,000 units of product X per month. Each un

Question

Able Company manufactures and sells 20,000 units of product X per month. Each unit of product X sells for $16 and has a contribution margin of $5. If product X is discontinued, $66,000 in fixed monthly overhead costs would be eliminated and there would be no effect on the sales volume of Able Company's other products. If product X is discontinued, Able Company's monthly income before taxes should:

Answer

A) Increase by $100,000. B) Increase by $34,000. C) Decrease by $100,000. D) Decrease by $34,000.

Explanation / Answer

D) Decrease by $34,000.

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