Reference no: EM132603529
Bingham Company manufactures and sells Product J. Results for last year for the manufacture and sale of Product J are as follows
Sales (10,000 units at $160 each) = $1,600,000
Less: Costs; = $960,000
Variable Production Costs = $240,000
Sales Commissions -15% of Sales = $195,000
Salaries of Line Supervisors =$180,000
Traceable Fixed Factory Overhead (Allocated to product on the Basis of Square Meters Occupied) = $170,000
Total Cost = $1,745,000
Operating Income (Loss) =$145,000
- Bingham Company anticipates no change in the operating result for Product J in the foreseeable future if the product is produced. Bingham is re-examining all of its products and is trying to decide whether or not to discontinue the manufacture and sale of Product J. The company's total fixed factory overhead cost would not be affected by this decision.
Question 1: Assume that discontinuing the manufacture and sale of Product J will not affect the sale of other products. If the company discontinues Product J, what will be the change in annual operating income due to this decision?
A. $25,000 decrease.
B. $145,000 increase.
C. $170,000 decrease.
D. $315,000 decrease
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