Exhibit 7-1 Talmont Products Has Dropped the Price Per Unit of Its

Multiple Choice

Exhibit 7-1
Talmont Products has dropped the price per unit of its smart phone product from $1,060 to $500.There are some units in work-in-process inventory that have costs of $600 per unit associated with them.Talmont could sell these units in their current state for $400.It will cost Talmont $40 to complete these units so that they can be sold for $500 each.
-Refer to Exhibit 7-1.Talmont is considering the option of throwing away the remaining smart phone units that are in work-in-process inventory.What effect would this decision have on net income?

A) Net income would decrease by $1,060 for each unit discarded.
B) Net income would decrease by $600 for each unit discarded.
C) Net income will increase by $200 for each unit discarded.
D) This decision would have no effect on net income.
E) None of the answer choices is correct.