Management and accounting Spencer Company is considering closing one of its product lines. Current data on the product line is as follows: Description Sales revenue $20,000 Variable costs$17,000 Direct avoidable fxed costs $7,000 Indirect allocated fxed costs $5,000 Net Income Loss on the product line ($9,000) *The direct avoidable fxed costs will be eliminated if the product line is closed. **The indirect allocated fxed costs will remain the same whether the product line is continued or closed.In addition, if Spencer closes the product line, Spencer can sublease its production facility to another company and earn subleaserevenue of $2,700 per year. Assume that Spencer decides to discontinue this product line. By how much will overall company net income change? Company net income will INCREASE by $9000 Company net income will DECREASE by $9000 Company net income will DECREASE by $6700 Company net income will INCREASE by $6700
Spencer Company is considering closing one of its product lines. Current data on the product line is as follows:
Description
Sales revenue $20,000
Variable costs$17,000
Direct avoidable fxed costs $7,000
Indirect allocated fxed costs $5,000
Net Income Loss on the product line ($9,000)
*The direct avoidable fxed costs will be eliminated if the product line is closed.
**The indirect allocated fxed costs will remain the same whether the product line is continued or closed.In addition, if Spencer closes the product line, Spencer can sublease its production facility to another company and earn subleaserevenue of $2,700 per year. Assume that Spencer decides to discontinue this product line.
By how much will overall company net income change?
Company net income will INCREASE by $9000
Company net income will DECREASE by $9000
Company net income will DECREASE by $6700
Company net income will INCREASE by $6700
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