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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