Below is the condensed income statement for Jay Tools for the past year:   Product   T1 T2 Sales $340,000 $160,000 Costs:        Variable costs  $270,000  $110,000    Fixed costs  80,000    20,000 Total costs $350,000 $130,000 Income (loss)  $(10,000) $ 30,000       Since product T1 is not giving profit, Jay is considering discontinuing product T1 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 Product T2. What is the amount of change in net income for the current year that will result from the discontinuance of Product T1?   Select one: a. $70,000 increase. b. $50,000 increase. c. $50,000 decrease. d. $70,000 decrease. e. None of the above answers is correct.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

Below is the condensed income statement for Jay Tools for the past year:

 

Product

 

T1

T2

Sales

$340,000

$160,000

Costs:

 

 

   Variable costs

 $270,000

 $110,000

   Fixed costs

 80,000

   20,000

Total costs

$350,000

$130,000

Income (loss) 

$(10,000)

$ 30,000

 

 

 

Since product T1 is not giving profit, Jay is considering discontinuing product T1 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 Product T2. What is the amount of change in net income for the current year that will result from the discontinuance of Product T1?

 

Select one:

a.

$70,000 increase.

b.

$50,000 increase.

c.

$50,000 decrease.

d.

$70,000 decrease.

e.

None of the above answers is correct.

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps with 2 images

Blurred answer
Knowledge Booster
Discontinuing operations for a product or a service line
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education