Reference no: EM133143762

Question - Please choose the right answer and show supporting calculations: The James Franco Products Company produces three different product lines: Peptides, Steroids& Nucleotides. For the most recent period, income statements for each group are presented below:

	Peptides	Steroids	Nucleotides
Sales	$40,000	$600,000	$25,000
Variable CGS	(10,000)	(300,000)	(5,000)
Variable Selling Exp	(5,000)	(40,000)	(2,000)
Direct Fixed Costs	(30,000)	(150,000)	(1,000)
Allocated Fixed Costs	(25,000)	(60,000)	(10,000)
Operating Income	$(30,000)	50,000	7,000

The company is disappointed in the performance of the Peptides group & is considering dropping the product line. The company has estimated that 20% of the direct fixed costs of the Peptides Product Line would be eliminated if the product line was dropped. What would be the effect on total corporate profits if the Peptides Product Line was discontinued?

a. Corporate profits increase by $ 5,000

b. Corporate profits decrease by $19,000

c. Corporate profits decrease by$1,000

d. Corporate profits decrease by $ 25,000