Lost A Friend Corporation produces and sells 10,000 units of Product X each month. The selling price of Product X is $40 per unit, and variable expenses are $32 per unit. A study has been made concerning whether Product X should be discontinued. The study shows that $70,000 of the $120,000 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 would be: a. ($30,000) b. $30,000 c. ($40,000) d. $40,000 e. None of the above

a. ($30,000)

Explanation:

Keep Product X

Sales (10,000 units × $40 per unit) $400,000

Variable expenses (10,000 units × $32 per unit) $ 320,000

Contribution margin ($400,000-$320,000) $80,000

Fixed expenses $120,000

Financial advantage (disadvantage)$ (40,000)

Drop product X

Sales $0

Variable expenses $0

Contribution margin $0

Fixed expenses $70,000

Financial advantage (disadvantage)$ (70,000)

DIFFERENCE (Keep product X -Drop Product X)

Sales ($400,000)

Variable expenses $320,000

Contribution margin ($80,000)

Fixed expenses $50,000

Financial advantage (disadvantage)$ (30,000)

cognitive overload: having a lot on your mind impairs decision-making and tends to result in the simplest, but not necessarily best, option being selected.

empathy gaps: overlooking how you might feel in a different situation can result in unnecessary purchases, such as overbuying when shopping for food on an empty stomach.

optimism and overconfidence: wearing rose-tinted glasses and having unrealistic expectations about the future can affect money management and leave you unprepared for a change in circumstance.

instant gratification: seeking instant gratification drives impulsive spending and can undermine long-term planning and savings.

harmful habits: automatic or mindless behaviour can amplify a poor financial decision as it becomes a recurring event.

social norms: we are heavily influenced by the actions of others; while this can be in certain circumstances, it also contributes to the pressure to keep up with the joneses through conspicuous consumption.

answermeasured by how well she or he does the job'; /