Option A is the proper response. It will only increase by $21,000 if it can completely eliminate all of the fixed expenses related to that product line.
Net income, in both business and accounting, is an entity's revenue fewer costs, depreciation and amortization, interest, and taxes for a given accounting period.
All fixed expenses related to a discontinued product line should also be discontinued. then the corporation can add $21,000 to its overall net profits. When a product line is discontinued, variable expenses are automatically eliminated.
The correct response is A. only if it can eliminate all of the fixed costs related to that product line will it increase by $21,000.
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<u>COMPLETE QUESTION:</u>
If a firm decides to eliminate a product line that produces a yearly net loss of $21,000, its yearly net income
A. will increase by $21,000 only if it can eliminate all of the fixed costs associated with that product line.
B. will increase by $21,000 only if it can eliminate all of the variable costs associated with that product line.
C. will automatically increase by $21,000.
D. will decrease unless the firm can eliminate all of the fixed costs associated with that product line.
