The following results were reported by the ABC Company for last year for the man

Question

The following results were reported by the ABC Company for last year for the manufacture and sale of one of its products known as a Ham.

ABC Company is trying to determine whether or not to discontinue the manufacture and sale of Hams. The operating results reported above for last year are expected to continue in the foreseeable future if the product is not dropped. The fixed manufacturing overhead represents the costs of production facilities and equipment that the Ham product shares with other products produced by ABC . If the Ham product were dropped, there would be no change in the fixed manufacturing costs of the company.
Assume that discontinuing the manufacture and sale of Hams will have no effect on the sale of other product lines. If the company discontinues the Ham product line, the change in annual operating income (or loss) should be:

$125,800 increase

$251,800 decrease

$105,800 decrease

$39,850 decrease

  Sales (3,600 Hams at $131 each)    $471,600      Variable cost of sales    $226,800     Variable distribution costs    39,600      Fixed advertising expense    284,000      Salary of product line manager    27,000      Fixed manufacturing overhead    146,000      Net operating loss    $(251,800)

Explanation / Answer

               If Ham were dropped, there would be no sales and there would be no costs associated with it except for the $146,000 of fixed manufacturing overhead. Since the net operating loss was $251,800, the $146,000 would increase that loss by $105,800. So the answer is C

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