Answer:
A) operating income decreases by $84,000
Explanation:
Sales $700,000 ⇒ ELIMINATED, SINCE THE PRODUCTS WILL NOT BE SOLD ANYMORE
Variable Expenses ($430,000) ⇒ ELIMINATED, SINCE THE PRODUCTS WILL NOT BE SOLD ANYMORE
Fixed Expenses ($310,000) ⇒ REDUCED BY 60% TO ($124,000)
Operating Loss ($40,000) ⇒ INCOME WILL DECREASE IN TOTAL BY $124,000
Since the total decrease income will be $124,000, that represents = $124,000 (unavoidable fixed costs) - $40,000 (current loss) = $84,000 in additional losses
