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Discontinue a Segment Product AG52 has revenues of $195,200, variable cost of goods sold of $115,200, variable selling expens
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Answer #1

Solution:

Alternative 1 : continue

Revenues $195,200
Cost:
Variable Cost of goods sold $115,200
Variable Selling expenses $33,000
Fixed Costs $61,500
Net Income Effect -$14,500

Alternative 2 : Discontinue

Revenues 0
Cost:
Variable Cost of goods sold 0
Variable Selling expenses 0
Fixed Costs $61,500
Net Income Effect -$61,500

As there is a greater loss of 61,500 when the product is discontinued , product should be continued.

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