9 February, 13:53

# The condensed income statement for a Fletcher Inc. for the past year is as follows: Product F G H Total Sales \$300,000 \$210,000 \$340,000 \$850,000 Costs: Variable costs \$ (180,000) \$ (180,000) \$ (220,000) \$ (590,000) Fixed costs (50,000) (50,000) (40,000) (140,000) Total costs \$ (230,000) \$ (230,000) \$ (260,000) \$ (730,000) Income (loss) \$70,000 \$ (20,000) \$80,000 \$120,000Management 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.\$20,000 decreaseb.\$20,000 increasec.\$30,000 increased.\$30,000 decrease

+4
1. 9 February, 16:07
0
What is the amount of change in net income for the current year that will result from the discontinuance of Product G?

d.\$30,000 decrease

Explanation:

The impact it's a decrease of \$30,000 in the net income because the operating income of the product G before the discotinuance it's - \$20,000 with a fixed cost of \$50,000.

But now with the discotinuance of product G the impact in the total income will be all the fixed cost of \$50,000.

The total income of the company with all the products it's \$130,000 if the product G it's discontinued the it will have an negativly impact of - \$30,000, then the result it's \$100,000.

TOTAL

850.000 Sales

-580.000 Variable costs

270.000 Contribution Margin

-140.000 Fixed Cost

-720.000 Total Cost

130.000 Operating Income

Without Product G

TOTAL Product

640.000 Sales

-400.000 Variable costs

240.000 Contribution Margin

-140.000 Fixed Cost

-540.000 Total Cost

100.000 Operating Income

F G H TOTAL Product

300.000 210.000 340.000 850.000 Sales

-180.000 - 180.000 - 220.000 - 580.000 Variable costs

120.000 30.000 120.000 270.000 Cont. Margin

-50.000 - 50.000 - 40.000 - 140.000 Fixed Cost

-230.000 - 230.000 - 260.000 - 720.000 Total Cost

70.000 - 20.000 80.000 130.000 Operating Income

F G H TOTAL Product

300.000 - 340.000 640.000 Sales

-180.000 - - 220.000 - 400.000 Variable costs

120.000 - 120.000 240.000 Cont. Margin

-50.000 - 50.000 - 40.000 - 140.000 Fixed Cost

-230.000 - 50.000 - 260.000 - 540.000 Total Cost

70.000 - 50.000 80.000 100.000 Operating Income