Answer:
There is a financial disadvantage of ($30,000).
Explanation:
The discontinuity of product X would result in the contribution lost.
Sales that would be lost = $40 × 10,000 units = $400,000
Relevant variable cost with the production of product X that would be saved = $32 × 10,000 units = $320,000
Contribution lost = Sales lost - Variable cost saved
Contribution lost = $400,000 - $320,000
Contribution lost = $80,000
Saving in fixed costs = $120,000 - $70,000 (this would not be incurred) = $50,000
However, still contribution lost is more than the saving in fixed costs
Therefore, the financial disadvantage = $80,000 - $50,000 = ($30,000)
