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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

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jepessoa

Answer:

net income will decrease by $30,000

Explanation:

The information is incomplete, so I looked for a similar question (see attached image).

Even though product G resulted in a $20,000 loss, it absorbed $50,000 of fixed costs.

The net financial effect of discontinuing product G = unavoidable fixed costs - previous gain or loss resulting from operations = -$50,000 - (-$20,000) = -$50,000 + $20,000 = -$30,000.

So net income will decrease by $30,000.

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