A Study Has Been Conducted to Determine If Product a Should

Multiple Choice

A study has been conducted to determine if Product A should be dropped. Sales of the product total $400,000 per year; variable expenses total $270,000 per year. Fixed expenses charged to the product total $160,000 per year. The company estimates that $70,000 of these fixed expenses are not avoidable even if the product is dropped. If Product A is dropped, the company's overall net operating income would:

A) decrease by $40,000 per year
B) increase by $40,000 per year
C) decrease by $30,000 per year
D) increase by $30,000 per year