Bailey Corporation Manufactures and Sells a Number of Products, Including

Multiple Choice

Bailey Corporation manufactures and sells a number of products, including Product G. Results for last year for the manufacture and sale of Product G are as follows:

Bailey is trying to decide whether or not to discontinue the manufacture and sale of Product G. All expenses other than fixed manufacturing overhead are avoidable if the product is dropped. None of the fixed manufacturing overhead is avoidable.

-Assume that dropping Product G will have no effect on other product lines. If the company drops Product G, the change in annual net operating income due to this decision will be a:

A) $10,000 decrease
B) $55,000 increase
C) $15,000 decrease
D) $40,000 decrease