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Question - A company is considering closing one of its product lines. Current data on the product line are as follows:
Sales revenue $50,000
Variable costs (36,000)
Direct avoidable fixed costs (9,000)
Indirect allocated fixed costs (7,000)
Net income (loss) on the product line ($2,000)
The direct avoidable fixed costs will be eliminated if the product line is closed. The indirect allocated fixed costs will remain the same whether the product line is continued or closed.
By how much will overall company net income change if this company decides to discontinue this product line?
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