Bingham Company Manufactures and Sells Product J Bingham Company Anticipates No Change in the Operating Result for Year

question 71

Multiple Choice

Bingham Company manufactures and sells Product J. Results for last year for the manufacture and sale of Product J are as follows:

$\begin{array}{|l|r|}\hline \text { Sales }(10,000 \text { units at } \$ 160 \text { each) } & \$ 1,600,000 \\\hline \text { Less: Costs; } & \$ 960,000 \\\hline \text { Variable Production Costs } & \$ 240,000 \\\hline \text { Sales Commisions }-15 \% \text { of Sales } & \$ 195,000 \\\hline \text { Salaries of Line Supervisors } & \$ 180,000 \\\hline \text { Traceable Fixed Factory Overhead (Allocated to } & \$ 170,000 \\\text { product on the Basis of Square Meters Occupied) } & \\\hline \text { Total Cost } & \$ 1,745,000 \\\hline \text { Operating Income (Loss) } & \$ 145,000 \\\hline\end{array}$

Bingham Company anticipates no change in the operating result for Product $\mathrm{J}$ in the foreseeable future if the product is produced. Bingham is re-examining all of its products and is trying to decide whether or not to discontinue the manufacture and sale of Product J. The company's total fixed factory overhead cost would not be affected by this decision.
-Assume that discontinuing Product J would result in a $30,000 increase in the contribution margin of other product lines.If Bingham chooses to discontinue Product J,what will be the change in operating income next year due to this action?

• A) $5,000 increase.
• B) $120,000 increase.
• C) $145,000 increase.
• D) $145,000 decrease.

---

Definitions:

Economic Factors

Elements that influence consumer behavior, business operations, and economic policies, including inflation, unemployment rates, and interest rates.

Affluent Young Adults

Young individuals who possess significant financial wealth or high-income levels.

Living at Home

Residing in one's family home, often implying the presence of parents or relatives, typically used in reference to adults or young adults.

Marital Role Strain

Stress experienced by an individual due to the challenges and demands associated with their role within a marriage.