Your Company produces 5,000 units of Product X each year. Each unit of Product X sells for $8 and has a contribution margin of $5. Fixed costs are $30,000. If Product X is discontinued, $18,000 of fixed overhead would continue. As a result of discontinuing Product X, the company'soverall operating income would:O A. increase by $13,000O B. decreased by $13,000OC. decrease by $7,000O D. decreased by $25,000O E. increase by $7,000

Company may choose to discontinue a loss making or less profitable product after considering the…

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Business

Accounting

result of discontinuing Product X, th

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Your Company produces 5,000 units of Product X each year. Each unit of Product X sells for $8 and has a contribution margin of $5. Fixed costs are $30,000. If Product X is discontinued, $18,000 of fixed overhead would continue. As a result of discontinuing Product X, the company's
overall operating income would:
O A. increase by $13,000
O B. decreased by $13,000
OC. decrease by $7,000
O D. decreased by $25,000
O E. increase by $7,000

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