The condensed income statement for a fletcher inc. for the past year is as follows: product f g h total sales $300,000 $210,000 $340,000 $850,000 costs: variable costs $(180,000) $(180,000) $(220,000) $(590,000) fixed costs (50,000) (50,000) (40,000) (140,000) total costs $(230,000) $(230,000) $(260,000) $(730,000) income (loss) $70,000 $(20,000) $80,000 $120,000
management is considering the discontinuance of the manufacture and sale of product g 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 products f and h. what is the amount of change in net income for the current year that will result from the discontinuance of product g?
a.$20,000 decrease
b.$20,000 increase
c.$30,000 increase
d.$30,000 decrease

What is the amount of change in net income for the current year that will result from the discontinuance of Product G?

d.$30,000 decrease

Explanation:

The impact it's a decrease of $30,000 in the net income because the operating income of the product G before the discotinuance it's -$20,000 with a fixed cost of  $50,000.

But now with the discotinuance of product G the impact in the total income will be all the fixed cost of $50,000.

The total income of the company with all the products it's $130,000 if the product G it's discontinued the it will have an negativly impact of -$30,000, then the result it's $100,000.

TOTAL    

850.000  Sales

-580.000  Variable costs

270.000  Contribution Margin

-140.000  Fixed Cost

-720.000  Total Cost

130.000  Operating Income

Without Product G

TOTAL    Product  

640.000  Sales

-400.000  Variable costs

240.000  Contribution Margin

-140.000  Fixed Cost

-540.000  Total Cost

100.000  Operating Income

    F               G               H             TOTAL  Product  

300.000   210.000   340.000   850.000  Sales

-180.000  -180.000  -220.000  -580.000  Variable costs

120.000   30.000    120.000   270.000  Cont. Margin

-50.000  -50.000  -40.000  -140.000  Fixed Cost

-230.000  -230.000  -260.000  -720.000  Total Cost

70.000    -20.000    80.000    130.000  Operating Income

    F                    G              H              TOTAL      Product  

300.000          -        340.000   640.000  Sales

-180.000           -      -220.000  -400.000  Variable costs

120.000          -        120.000   240.000  Cont. Margin

-50.000    -50.000  -40.000  -140.000  Fixed Cost

-230.000  -50.000  -260.000  -540.000  Total Cost

70.000    -50.000    80.000    100.000  Operating Income

if it is for a job, then you should learn everything you can about the job, like what does it involve, what qualification is required and how you are the right person for that job. dress appropriately for the interview. get plenty of rest the night before. good luck!