Balser Company Manufactures and Sells a Product Called JYMP -Balser Anticipates No Change in the Operating Results for JYMP

Multiple Choice

Balser Company manufactures and sells a product called JYMP. Results of last year for the manufacture and sale of JYMP's are as follows: $\begin{array}{lrr} \text { Sales ( \( 8,000 . J Y M P \) s at \( £ 120 \) each) . } &£ 960,000\\ \text { Less costs: } &\\ \text { Variable production costs. } &464,000\\ \text { Sales commissions (15\% of sales) . } &144,000\\ \text { Salary of product line manager.} &100,000\\ \text { Fixed product line advertising. } &160,000\\ \text { Fixed manutacturing overhead.} &132,000\\ \text { Total costs. } &1,000,000\\ \text {Net operating loss. } &£(40,000) \\\end{array}$

-Balser anticipates no change in the operating results for JYMP in the foreseeable future. Balser is reexamining all of its product lines and is trying to decide whether or not to discontinue the manufacture and sale of JYMPs. Total fixed manufacturing overhead costs would not be affected by a decision to drop any one product line. Assume that discontinuing the JYMP line would result in a £90,000 increase in the contribution margin of other product lines. If Balser chooses to discontinue the JYMP line, then the change in operating income next year due to this action will be a

A) £40,000 decrease.
B) £40,000 increase.
C) £ 2,000 decrease.
D) £50,000 increase.