Lusk Corporation produces and sells 13,900 units of Product X each month. The se

Question

Lusk Corporation produces and sells 13,900 units of Product X each month. The selling price of Product X is $21 per unit, and variable expenses are $15 per unit. A study has been made concerning whether Product X should be discontinued. The study shows that $74,000 of the $104,000 in monthly fixed expenses charged to Product X would not be avoidable even if the product was discontinued. If Product X is discontinued, the annual financial advantage (disadvantage) for the company of eliminating this product should be:

Multiple Choice

($53,400)

$20,600

$50,600

($50,600)

Explanation / Answer

Answer is $(53400)

Particulars Continued Discontinued Difference Sales (13900 x 21)        291,900.00                        -   Less: Variable Cost (13900 x 15)        208,500.00                        -   Contributon Margin          83,400.00                        -   Less: Fixed Cost 104000 and 74000        104,000.00         74,000.00     (30,000.00) Income (Loss)        (20,600.00)       (74,000.00)     (53,400.00)

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