Marigold Machines has four product lines, one of which reflects the following results: Sales $221000 Variable costs 118000 Contribution margin 103000 Fixed costs 118000 Net loss $(15000) 43 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? O It will increase by $15000. It will increase by $47200. It will decrease by $40800. O It will decrease by $55800.

Principles of Accounting Volume 2
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ISBN:9781947172609
Author:OpenStax
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Chapter3: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 9EB: Baghdad Company produces a single product. They have recently received the result of a market survey...
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Marigold Machines has four product lines, one of which reflects the following results:
Sales
$221000
Variable costs
118000
Contribution margin
103000
Fixed costs
118000
Net loss
$(15000)
43
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?
O It will increase by $15000.
It will increase by $47200.
It will decrease by $40800.
O It will decrease by $55800.
Transcribed Image Text:Marigold Machines has four product lines, one of which reflects the following results: Sales $221000 Variable costs 118000 Contribution margin 103000 Fixed costs 118000 Net loss $(15000) 43 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? O It will increase by $15000. It will increase by $47200. It will decrease by $40800. O It will decrease by $55800.
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