A Company Has Three Product Lines, One of Which Reflects

question 20

Multiple Choice

A company has three product lines, one of which reflects the following results: $\begin{array}{lr}\text { Sales } & \$ 215,000 \\\text { Variable expenses } & 125,000 \\\text { Contribution margin } & 90,000 \\\text { Fixed expenses } & 130,000 \\\text { Net loss } & \$(40,000) \end{array}$ If this product line is eliminated, 60% of the fixed expenses can be eliminated and the other 40% will be allocated to other product lines. If management decides to eliminate this product line, the company's net income will

• A)increase by $40,000.
• B)decrease by $90,000.
• C)decrease by $12,000.
• D)increase by $12,000.

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