Answer:
The company will lose $85,000 if the product line is discontinued
Explanation:
Giving the following information:
Sales= 480,000
variable expenses= (360,000)
Contribution margin= 120,000
fixed expenses= (140,000)
Net operating income= (20,000)
If Gator eliminates the line, $35,000 of fixed costs will remain.
We need to determine the effect on income if the product line is discontinued.
Effect on income= fixed costs - net operating income
Effect on income= -105,000 - (-20,000)
Effect on income= -85,000
The company will lose $85,000 if the product line is discontinued
