XYZ Company has four sales territories and is considering eliminating the Great Lakes Region which had sales of $100,000,direct expenses of $70,000 and indirect expenses of $50,000.If the Great Lakes Region is eliminated,80% of the indirect expenses would still remain.If this region were to be eliminated,the company's overall net income would be:

Question

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If the Great Lakes Region is eliminated, the company would save $70,000 in direct expenses and $40,000 in indirect expenses (which is 80% of the current $50,000). Therefore, the total savings would be $110,000 ($70,000 + $40,000). However, the company would also lose $100,000 in sales, resulting in a net income decrease of $10,000 ($110,000 - $100,000). Therefore, the overall net income would be $20,000 lower if the Great Lakes Region is eliminated.

XYZ Company Has Four Sales Territories and Is Considering Eliminating