Below is the condensed income statement for Jay Tools for the past year: Product T1 T2 Sales $340,000 $160,000 Costs: Variable costs $270,000 $110,000 Fixed costs 80,000 20,000 Total costs $350,000 $130,000 Income (loss) $(10,000) $ 30,000 Since product T1 is not giving profit, Jay is considering discontinuing product T1 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 Product T2. What is the amount of change in net income for the current year that will result from the discontinuance of Product T1? Select one: a. $70,000 increase. b. $50,000 increase. c. $50,000 decrease. d. $70,000 decrease. e. None of the above answers is correct.
Below is the condensed income statement for Jay Tools for the past year:
Product
T1
T2
Sales
$340,000
$160,000
Costs:
Variable costs
$270,000
$110,000
Fixed costs
80,000
20,000
Total costs
$350,000
$130,000
Income (loss)
$(10,000)
$ 30,000
Since product T1 is not giving profit, Jay is considering discontinuing product T1 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 Product T2. What is the amount of change in net income for the current year that will result from the discontinuance of Product T1?
Select one:
a.
$70,000 increase.
b.
$50,000 increase.
c.
$50,000 decrease.
d.
$70,000 decrease.
e.
None of the above answers is correct.
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