The Condensed Income Statement for a Business for the Past $\quad$

question 99

Multiple Choice

The condensed income statement for a business for the past year is presented as follows: ? $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Product }$$\begin{array}{lrrrr}&\mathrm{F}& \mathrm{G} & \mathrm{H}&\text { Total}\\ \text { Sales } & \$ 200,000 & \$ 180,000 & \$ 320,000 & \$ 700,000 \\\text { Less variable costs } & 120,000 & \underline{160,000} & \underline{200,000} & 480,000 \\\text { Contribution margin } & \$ 80,000 & \$ 20,000 & \$ 120,000 & \$ 220,00 \\\text { Less fixed costs } & 25,000 & \underline{30,000} & \underline{40,000} & \underline{95,000} \\\begin{array}{l}\text { Income (loss) from } \\\text { operations }\end{array} & \$ \mathbf{5 5 , 0 0 0} & \$ 10,000 & \$ \mathbf{8 0 , 0 0 0} & \$ \mathbf{1 2 5 , 0 0 0}\end{array}$
??
Management is considering the discontinuance of the manufacture and sale of Product G 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 Products F and H.What is the amount of change in net income for the current year that will result from the discontinuance of Product G?

• A) $10,000 increase
• B) $20,000 increase
• C) $10,000 decrease
• D) $20,000 decrease

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