Lusk Company : calculate overall net operating income

Question

 

Lusk Company produces and sells 14,200 units of Product A each month. The selling price of Product A is $24 per unit, and variable expenses are $18 per unit. A study has been made concerning whether Product A should be discontinued. The study shows that $73,000 of the $103,000 in fixed expenses charged to Product A would continue even if the product was discontinued. These data indicate that if Product A is discontinued, the company's overall net operating income would:

 

a. increase by $17,800 per month

b. decrease by $55,200 per month

c. decrease by $47,800 per month

d. increase by $47,800 per month

 

 

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