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Problem 1: A study has been conducted to determine if one of the departments in Parry Company should be discontinued. The contribution margin in the department is $40,000 per year. Fixed expenses charged to the department are $65,000 per year. It is estimated that $30,000 of these fixed expenses could be eliminated if the department is discontinued. These data indicate that if the department is discontinued, the company's overall net operating income would:
A) increase by $15,000 per year.
B) decrease by $15,000 per year.
C) decrease by $25,000 per year.
D) increase by $25,000 per year.
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