The Condensed Income Statement for a Business for the Past

Multiple Choice

The condensed income statement for a business for the past year is presented as follows: 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) $10,000 increase
B) $20,000 increase
C) $10,000 decrease
D) $20,000 decrease $\begin{array}{lrrrr}&&&\text { Product }\\&\mathrm{F} & \mathrm{G} & \mathrm{H} & \text { Total } \\\hline\text { Sales } & \$ 200,000 & \$ 180,000 & \$ 320,000 & \$ 700,000 \\\text { Less variable costs } & 120,000 & 160,000 & 200,000 & 480,000 \\\text { Contribution margin } & \$ 80,000 & \$ 20,000 & \$ 120,000 & \$ 220,000 \\\text { Less fixed costs } & 25,000 & 30,000 & 40,000 & 95,000 \\\text { Income (loss) from oper } & \$ 55,000 & \$(10,000) & \$ 80,000 & \$ 125,000\end{array}$