Lusk Company produces and sells 16,200 units of Product A each month. The sellin
ID: 2361470 • Letter: L
Question
Lusk Company produces and sells 16,200 units of Product A each month. The selling price of Product A is $32 per unit, and variable expenses are $26 per unit. A study has been made concerning whether Product A should be discontinued. The study shows that $72,000 of the $112,000 in fixed expenses charged to Product A would continue even if the product was discontinued. These data indicate that if Product A is discontinued, the company's overall net operating income would:
Lusk Company produces and sells 16,200 units of Product A each month. The selling price of Product A is $32 per unit, and variable expenses are $26 per unit. A study has been made concerning whether Product A should be discontinued. The study shows that $72,000 of the $112,000 in fixed expenses charged to Product A would continue even if the product was discontinued. These data indicate that if Product A is discontinued, the company's overall net operating income would:
Explanation / Answer
decrease by $57,200 per month working ------------ Contribution on Product A = 16200 x (32-26) = $97200 Fixed costs related to Product A = (112000-72000) = $40000 ------------------------------------------------------------------------------------ Actual profit that is decreased if A is discontinued = $57200 per month
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