Diversified Machines Has Four Product Lines, One of Which Reflects

question 60

Multiple Choice

Diversified Machines has four product lines, one of which reflects the following results: $\begin{array}{lr}\text { Sales } & \$ 220,000 \\\text { Variable expenses } & 120,000 \\\text { Contribution margin } & 100,000 \\\text { Fixed expenses } & 120,000\\\text { Net loss }&\$(20,000) \end{array}$ If this product line is eliminated, 40% of the fixed expenses can be eliminated and the other 60% will be allocated to other product lines.If management decides to eliminate this product line, what will happen to the company's net income?

• A)It will increase by $20,000.
• B)It will decrease by $52,000.
• C)It will decrease by $32,000.
• D)It will increase by $48,000.

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