Bramo Feet Company produces and sells 8,000 units of Product C each year. Each unit of product sells for P10 and has a contribution margin of P6. It is estimated that if the product is discontinued, P50,000 of the P60,000 in fixed costs charged to the product could be eliminated. These data indicate that if the product is discontinued, overall company operating income should:

Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter16: Cost-volume-profit Analysis
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Problem 36P: Faldo Company produces a single product. The projected income statement for the coming year, based...
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Bramo Feet Company produces and sells 8,000 units of Product C each year. Each unit of product sells for P10 and has a contribution margin of P6. It is estimated that if the product is discontinued, P50,000 of the P60,000 in fixed costs charged to the product could be eliminated. These data indicate that if the product is discontinued, overall company operating income should:
 
a. Increase by P2,000 per year
b. Decrease by P2,000 per year
c. Increase by P38,000 per year
d. Decrease by P38,000 per year
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