(38) A company is considering closing one of its product lines. Current data on the product line are as follows: D Sales revenue Variable costs Direct avoidable fixed costs $27,000 (19,000) (10,000) (2.000) Indirect allocated fixed costs Net income (loss) on the product line ($4.000) The direct avoidable fixed costs will be eliminated if the product line is closed. The indirect allocated fixed costs will remain the same whether the product line is continued or closed. By how much will overall company net income change if this company decides to discontinue this product line?

Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter8: Tactical Decision-making And Relevant Analysis
Section: Chapter Questions
Problem 11MCQ: Garrett Company provided the following information: Common fixed cost totaled 46,000. Garrett...
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(38) A company is considering closing one of its product lines. Current data on
the product line are as follows:
♫
Sales revenue
Variable costs
Direct avoidable fixed costs
$27,000
Indirect allocated fixed costs
Net income (loss) on the product line
($4,000)
The direct avoidable fixed costs will be eliminated if the product line is closed.
The indirect allocated fixed costs will remain the same whether the product line
is continued or closed.
O It will increase by $2,000.
O It will decrease by $2,000.
(19,000)
(10,000)
(2.000)
By how much will overall company net income change if this company decides
to discontinue this product line?
It will increase by $4,000.
O It will decrease by $4,000.
h
Transcribed Image Text:(38) A company is considering closing one of its product lines. Current data on the product line are as follows: ♫ Sales revenue Variable costs Direct avoidable fixed costs $27,000 Indirect allocated fixed costs Net income (loss) on the product line ($4,000) The direct avoidable fixed costs will be eliminated if the product line is closed. The indirect allocated fixed costs will remain the same whether the product line is continued or closed. O It will increase by $2,000. O It will decrease by $2,000. (19,000) (10,000) (2.000) By how much will overall company net income change if this company decides to discontinue this product line? It will increase by $4,000. O It will decrease by $4,000. h
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