A company has three product lines, one of which reflects the following results: Sales $170,000 Variable...
A company has three product lines, one of which reflects the following results:
Sales $170,000
Variable expenses $100,000
Contribution Margin $70,000
Fixed expenses $110,000
Net loss $(40,000)
If this product line is eliminated, 60% of the fixed expenses can be eliminated. If management decides to eliminate this product line, the company's net income will increase/decrease by?
Homework Answers
Even if product line eliminated fixed cost is incurred.
Incurring Cost = $ 110000 * 40 % = $ 66000.
Net income if eliminated = $ ( 66000 ).
Net Income if continue = $ ( 40000 ).
Net income increase or decrease = $ ( 66000 ) - $ ( 40000 ).
Net Income decrease by $ 26000.
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