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

Question 59

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  Product \text { Product }FGH Total Sales $200,000$180,000$320,000$700,000 Less variable costs 120,000160,000200,000480,000 Contribution margin $80,000$20,000$120,000$220,00 Less fixed costs 25,00030,00040,00095,000 Income (loss)  from  operations $55,000$10,000$80,000$125,000\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}
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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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