income for the current year that will result from the discontinuance of Product T?
income for the current year that will result from the discontinuance of Product T?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
The condensed income statement of Hayden Corp. for the past year is as follows:
Management is considering the discontinuance of the manufacture and sale of Product T 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 U. What is the amount of change in net income for the current year that will result from the discontinuance of Product T?
| Product | ||
| T | U | |
| Sales | $680,000 | $320,000 |
| Costs: | ||
| Variable costs | $540,000 | $220,000 |
| Fixed costs | 145,000 | 40,000 |
| Total costs | $685,000 | $260,000 |
| Income (loss) | $ (5,000) | $ 60,000 |
Management is considering the discontinuance of the manufacture and sale of Product T 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 U. What is the amount of change in net income for the current year that will result from the discontinuance of Product T?
a.$140,000 increase
b.$140,000 decrease
c.$5,000 increase
d.$5,000 decrease
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