A study has been conducted to determine if one of the product lines of Kalamazoo
ID: 2562574 • Letter: A
Question
A study has been conducted to determine if one of the product lines of Kalamazoo Company should be discontinued. This product line generates a contribution margin of $230000 per yearFixed expenses allocated to the product line are $320,000 per year. It is estimated that $205,000 of these fixed expenses could be eliminated if the product line is discontinued. These data indicate that if the product line is discontinued, the company's overall net operating income would: O increase by $115000 per year O decrease by $15,000 per year 0 increase by $25,000 per year. O decrease by $25,000 per year,Explanation / Answer
As per chegg guidelines we answer one question per post. But I have answered multiple questions. Kindly post remaining questions in next post Dear Student Thank you for using Chegg Please find below the answer and please give thumbs up Statementshowing Computations Paticulars Amount Relevant contribution Margin 230,000.00 Relevant Fixed Costs= 320,000 - 205,000 115,000.00 Incremental Income from Product Line = 230,000 - 115,000 115,000.00 If product line is discontinued company's overall net operating income would decrease by 115,000 per year Q4 Relevant contribution Margin 60,000.00 Relevant Fixed Costs= 70000 - 45000 25,000.00 Incremental Income from Product Line = 60000 - 25000 35,000.00 If product line is discontinued company's overall net operating income would decrease by 35,000 per year
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