Coronado Machines has four product lines, one of which reflects the following results: Sales $210000 Variable costs 111000 Contribution margin 99000 Fixed costs 111000 Net loss $(12000) If this product line is eliminated, 40% of the fixed costs can be eliminated and the other 60% will be allocated to other product lines. If management decides to eliminate this product line, what will happen to the company's net income? It will increase by $12000. It will increase by $44400. It will decrease by $42600. It will decrease by $54600.
Coronado Machines has four product lines, one of which reflects the following results: Sales $210000 Variable costs 111000 Contribution margin 99000 Fixed costs 111000 Net loss $(12000) If this product line is eliminated, 40% of the fixed costs can be eliminated and the other 60% will be allocated to other product lines. If management decides to eliminate this product line, what will happen to the company's net income? It will increase by $12000. It will increase by $44400. It will decrease by $42600. It will decrease by $54600.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Coronado Machines has four product lines, one of which reflects the following results:
If this product line is eliminated, 40% of the fixed costs can be eliminated and the other 60% will be allocated to other product lines. If management decides to eliminate this product line, what will happen to the company's net income?
| Sales | $210000 |
| Variable costs | 111000 |
| Contribution margin | 99000 |
| Fixed costs | 111000 |
| Net loss | $(12000) |
If this product line is eliminated, 40% of the fixed costs can be eliminated and the other 60% will be allocated to other product lines. If management decides to eliminate this product line, what will happen to the company's net income?
It will increase by $12000.
It will increase by $44400.
It will decrease by $42600.
It will decrease by $54600.
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