Author Question: Colonial North Manufacturing, Inc. is considering eliminating one of its product lines. The fixed ... (Read 34 times)

casperchen82 · **on:** Mar 6, 2021

Question 1

A segment has the following data:

Sales

$650,000

Variable costs

386,000

Fixed costs

365,500

What will be the incremental effect on net income if this segment is eliminated, assuming the fixed costs will be allocated to profitable segments?
◦ $284,500 increase
◦ $386,000 decrease
◦ $264,000 decrease
◦ $365,500 decrease

Question 2

Colonial North Manufacturing, Inc. is considering eliminating one of its product lines. The fixed costs currently allocated to the product line will be allocated to other product lines upon discontinuance. What financial effects occur if the product line is discontinued?
◦ net income will decrease by the amount of the contribution margin of the product line being discontinued
◦ the company's total fixed costs will increase by the amount of the contribution margin of the product line being discontinued
◦ the company's total fixed costs will decrease by the amount of the product line's fixed costs
◦ net income will decrease by the amount of the product line's fixed costs

matt95 · **Reply #1 on:** Mar 6, 2021

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