Lusk Company produces and sells 13,700 units of Product X each month. The sellin

Question

Lusk Company produces and sells 13,700 units of Product X each month. The selling price of Product X is $19 per unit, and variable expenses are $13 per unit. A study has been made concerning whether Product X should be discontinued. The study shows that $72,000 of the $102,000 in fixed expenses charged to Product X would continue even if the product was discontinued. These data indicate that if Product X is discontinued, the company's overall net operating income would:

A.increase by $49,800 per month

B.decrease by $52,200 per month

C.decrease by $49,800 per month

D.increase by $19,800 per month

Lusk Company produces and sells 13,700 units of Product X each month. The selling price of Product X is $19 per unit, and variable expenses are $13 per unit. A study has been made concerning whether Product X should be discontinued. The study shows that $72,000 of the $102,000 in fixed expenses charged to Product X would continue even if the product was discontinued. These data indicate that if Product X is discontinued, the company's overall net operating income would:

Explanation / Answer

Units sold 13700 Selling Price 19 Less: Variable Expenses 13 Contribution per unit 6 Total 82200 13700*6 Less Fixed Cost 102000 Net Profit -19800 If X is discontinued Then there will be loss of $ 72000 The net income would decrease by - 72000-(-19800) -52200 The correct option is B. Decrease by $ 52200 per month

Related Questions

Navigate

• Browse (All)
• Browse L
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.