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3 April, 21:35

Lusk Corporation produces and sells 14,000 units of Product X each month. The selling price of Product X is $22 per unit, and variable expenses are $16 per unit. A study has been made concerning whether Product X should be discontinued. The study shows that $73,000 of the $103,000 in fixed expenses charged to Product X would not be avoidable even if the product was discontinued. If Product X is discontinued, the company's overall net operating income would: decrease by $49,000 per month increase by $49,000 per month decrease by $54,000 per month increase by $19,000 per month

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  1. 3 April, 21:46
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    decrease by $54,000 per month

    Explanation:

    The impact on the net operating income would be shown below:

    In the first case,

    Sales ($22 * 14,000 units) = $308,000

    Variable expenses ($16 * 14,000 units) = - $224,000

    Fixed expenses = - $103,000

    Net loss = - $19,000

    And, the fixed cost continued is $73,000

    So, the net income decreased by

    = $73,000 - $19,000

    = $54,000

    if the product X is discontinued
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