Answer:
Amount of change in current income = $55,000 - (-$85,000) = $140,000
As there is loss from discontinuing product T.
Explanation:
Provided information,
There are two products T and U
Particulars T U
Sales $680,000 $320,000
Less: Variable Cost $540,000 $220,000
Less: Fixed Cost $145,000 $40,000
Net Income ($5,000) $60,000
NET PROFIT OF COMPANY = $55,000
As the company is planning to discontinue the production of product T there will be the following effects, provided no fixed cost cannot be avoided.
Thus, with same quantum of Product U
Total profit from product U = $60,000
Less: Fixed cost unavoidable $145,000
Thus, result is loss of $85,000
Total change = $55,000 - (-$85,000) = $140,000 decrease in net income.
