Question

Question 20 4 pts Abel Company produces three versions of baseball bats: wood, aluminum, and hard rubber. A condensed segmented income statement for a recent period follows: Total $763,000 Wood $500,000 Aluminum Hard Rubber $63,000 $200,000 Sales Variable expenses Contribution margin Fixed expenses Net income (loss) 140,000 325,000 58,000 523,000 175,000 75,000 $100,000 60,000 35,000 $25,000 5,000 20,000 $(15,000) 240,000 130,000 $110,000 Assume none of the fixed expenses for the hard rubber line are avoidable. What will be total net income if the line is dropped? None of the above. $105,000 $125,000 $103,000 $140,000

Answer 1

If hard rubber line is dropped, the contribution margin of that division which was bearing fixed costs earlier will now have to be beaded by the whole company.

So net income = 110,000 - Contribution margin 5,000

= 105,000

Option B