Question 1 A company has three product lines, one of which reflects the followin

Question

Question 1 A company has three product lines, one of which reflects the following results Sales Variable expenses Contribution margin Fixed expenses Net loss $211000 119000 92000 130000 $ (38000) If this product line is eliminated, 60% of the fixed expenses can be eliminated and the other 40% will be allocated to other product lines. If management decides to eliminate this product line, the company's net income will O increase by $14000 O increase by $3800o. O decrease by $92000. O decrease by $14000.

Explanation / Answer

Net loss after the product line is discontinued=(Fixed expenses*40%)

=(130,000*40%)=$52000

Hence net income would decrease by =(52000-38000)=$14000

Hence the correct option is D.

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

---

---

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