Product D incurred a net loss of 40000 during 2015 calculate

Product D incurred a net loss of $40,000 during 2015, calculated as follows: Sales $300,000 Variable Costs (150,000) Fixed Costs (190,000) Net Loss $(40,000) An analysis of the fixed costs reveals that $120,000 are avoidable and $70,000 are unavoidable. Profit for the business would increase or decrease by what amount if Product D is discontinued? Select one: a. $150,000 increase b. $80,000 decrease c. $30,000 decrease d. $40,000 increase

Solution

In case the Product D is Not discontinued.

Based on the analyst of Fixed Cost revelation the Net Profit / Loss would be,

Hence, from the above computation we can see that if the Product D is discontinued, the business would suffer a decrease in Net Profit of $80,000. (Option b)