The Condensed Income Statement for a Business for the Past

question 40

Multiple Choice

The condensed income statement for a business for the past year is as follows: ? $\begin{array}{lrr}&\text { Product }\\&A&B\\\text { Sales } & \$ 800,000 & \$ 550,000 \\\text { Less variable costs } & 720,000 & 430,000\\\text { Contribution margin } & \$ 80,000 & \$ 120,000 \\\text { Less fixed costs } & 125,000 & 45,000\\\text { Income (loss) from operations }&\$(45,000) &\$75,000\end{array}$ ?
Management is considering the discontinuance of the manufacture and sale of Product A at the beginning of the current year.The discontinuance would have no effect on the total fixed costs and expenses or on the sales of Product B.What is the amount of change in net income for the current year that will result from the discontinuance of Product A?

• A) $80,000 increase
• B) $45,000 increase
• C) $45,000 decrease
• D) $80,000 decrease

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