accounting

The condensed income statement for a business for the past year is as follows: ​

Product: white, black

Sales
white: $ 750,000
black: $550,000

Less variable costs
white: 400,000
black: 380,000

Contribution margin
white: $350,000
black: $170,000

Less fixed costs
white: 240,000
black: 100,000

Income (loss) from operations
white: $110,000
black: $ 70,000

Management is considering the discontinuance of the manufacture and sale of black at the beginning of the current year. The discontinuance would have no effect on the total fixed costs and expenses or on the sales of white. What is the amount of change in net income for the current year that will result from the discontinuance of black?
Select one:
a. $40,000 decrease
b. $180,000 decrease
c. $70,000 decrease
d. $170,000 decrease

Can not assume that net income will decrease by the income of black. This is because black takes a portion of the fixed costs which, when black is discontinued, will decrease the net income.

So my guess is $170,000 decrease: fixed cost plus income lost.

Is this reasoning correct?

  1. 👍 1
  2. 👎 0
  3. 👁 143

Respond to this Question

First Name

Your Response

Similar Questions

  1. Business

    1. One of the main disadvantages of buying a franchise is that you may end up A. choosing a poor location. B. hiring a large staff. C. paying too much for operating costs. D. feeling like an employee. D? 2. After you open your new

    asked by Beatrice on February 10, 2014
  2. BUSINESS

    1. In the process of brainstorming his goals, Robert realized his Web business was more about money than creativity. His decision to include a minimum monthly income of $5,000 as part of his mission statement is an example of A.

    asked by Beatrice on February 10, 2014
  3. math for the office professional

    last year the company you worked for did $232,000 in business. this year you anticipate an increase of 7% how much business do you expect to do this year?

    asked by Anonymous on June 22, 2012
  4. BUSINESS

    1. One of the main disadvantages of buying a franchise is that you may end up A. choosing a poor location. B. hiring a large staff. C. paying too much for operating costs. D. feeling like an employee. D? 2. After you open your new

    asked by Beatrice on February 10, 2014
  5. Accounts

    Which statement is prepared for only one date? Income Statement Statement of Cash Flows Balance Sheet Statement of Owner’s Equity D

    asked by Angela on August 10, 2018
  1. Principles of Finance HELP!!!

    Problem 16-7. Pro forma income statement At the end of last year, Roberts Inc. reported the following income statement (in millions of dollars): Sales 3000 Operating costs excluding depreciation 2450 EBITDA 550 Depreciation 250

    asked by Laura on September 29, 2006
  2. accounting

    During Denton Company’s first two years of operations, the company reported absorption costing net operating income as follows: Year 1 Year 2 Sales (@ $64 per unit) $ 1,216,000 $ 1,856,000 Cost of goods sold (@ $32 per unit)

    asked by Anonymous on September 29, 2012
  3. accounting

    18. Balance sheet and income statement data indicate the following: Bonds payable, 6% (issued 2000, due 2020) $1,200,000 Preferred 8% stock, $100 par (no change during the year) 200,000 Common stock, $50 par (no change during the

    asked by shannon on October 2, 2012
  4. Accounts

    The financial statement that shows business results in terms of revenue and expenses is __________. an income statement a balance sheet a statement of owner's equity the statement of cash flows Answer A

    asked by Angela on August 10, 2018
  5. accounting

    Christy Burch and Myung Lim, partners, compared their current income statement with their income statement of a year ago. They noted that sales were 12.0% higher than a year ago. They also noted that the total expenses were 20.0%

    asked by britt on January 13, 2012

You can view more similar questions or ask a new question.