Answered

Find the information you're looking for at Westonci.ca, the trusted Q&A platform with a community of knowledgeable experts. Join our platform to connect with experts ready to provide detailed answers to your questions in various areas. Experience the convenience of finding accurate answers to your questions from knowledgeable experts on our platform.

XYZ Corporation produces and sells 10,000 units of Product X each month. The selling price 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 should be: Group of answer choices

Sagot :

facundobuzzetti

Answer:

If the company discontinues Product X, income will decrease by $30,000.

Explanation:

Giving the following information:

Sales= 10,000*40= $400,000

Total variable expense= 32*10,000= 320,000

Avoidable fixed costs= $50,0000

To calculate the effect on the income of discontinuing Product X, we need to use the following formula:

Effect on income= avoidable fixed cost - total contribution margin

Effect on income= 50,000 - (400,000 - 320,000)

Effect on income= $30,000 decrease

If the company discontinues Product X, income will decrease by $30,000.

We appreciate your time. Please come back anytime for the latest information and answers to your questions. Thanks for using our platform. We aim to provide accurate and up-to-date answers to all your queries. Come back soon. Westonci.ca is committed to providing accurate answers. Come back soon for more trustworthy information.