Question

The condensed income statement for a business for the past year is as follows: Product T U Sales $660,000 $320,000 Less variable costs 540,000 220,000 Contribution margin $ 120,000 $100,000 Less fixed costs 145,000 40,000 Income (loss) from operations $ (25,000) $ 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 chang

Answer 1

$120,000 Decrease

Step-by-step explanation:

Calculation for the amount of change in net income resulting from the discontinuance of Product T.

PRODUCT T

Sales $660,000

Less Variable costs $540,000

Contribution margin $120,000 decrease

Therefore the amount of change in net income resulting from the discontinuance of Product T will be $120,000 decrease