The condensed income statement for a Fletcher Inc. for the past year is as follows: Product F G H Total Sales $300,000 $210,000 $340,000 $850,000 Costs: Variable costs $ (180,000) $ (180,000) $ (220,000) $ (590,000) Fixed costs (50,000) (50,000) (40,000) (140,000) Total costs $ (230,000) $ (230,000) $ (260,000) $ (730,000) Income (loss) $70,000 $ (20,000) $80,000 $120,000
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?
a.$20,000 decrease
b.$20,000 increase
c.$30,000 increase
d.$30,000 decrease
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