Bailey Corporation manufactures and sells a number of products, including Product G. Results for last year for the manufacture and sale of Product G are as follows:

Bailey is trying to decide whether or not to discontinue the manufacture and sale of Product G. All expenses other than fixed manufacturing overhead are avoidable if the product is dropped. None of the fixed manufacturing overhead is avoidable.
-Assume that dropping Product G would result in a $40,000 increase in the contribution margin of other product lines. If Bailey chooses to drop Product G, then the change in net operating income next year due to this action will be a:
A)$95,000 increase
B)$95,000 decrease
C)$25,000 decrease
D)$25,000 increase

Question

Bailey Corporation manufactures and sells a number of products, including Product G. Results for last year for the manufacture and sale of Product G are as follows:

Bailey is trying to decide whether or not to discontinue the manufacture and sale of Product G. All expenses other than fixed manufacturing overhead are avoidable if the product is dropped. None of the fixed manufacturing overhead is avoidable. 
-Assume that dropping Product G would result in a $40,000 increase in the contribution margin of other product lines. If Bailey chooses to drop Product G, then the change in net operating income next year due to this action will be a:
A)$95,000 increase 
B)$95,000 decrease 
C)$25,000 decrease 
D)$25,000 increase

Quizplus · Accepted Answer

The Answer of Bailey Corporation manufactures and sells a number of products, including Product G. Results for last year for the manufacture and sale of Product G are as follows:

Bailey is trying to decide whether or not to discontinue the manufacture and sale of Product G. All expenses other than fixed manufacturing overhead are avoidable if the product is dropped. None of the fixed manufacturing overhead is avoidable. 
-Assume that dropping Product G would result in a $40,000 increase in the contribution margin of other product lines. If Bailey chooses to drop Product G, then the change in net operating income next year due to this action will be a:
A)$95,000 increase 
B)$95,000 decrease 
C)$25,000 decrease 
D)$25,000 increase

Bailey Corporation Manufactures and Sells a Number of Products, Including