Balser Company manufactures and sells aproduct called JYMP. Results of last year for the manufacture and sale of JYMP’s are as follows:
|
Sales (8000 JYMP’s at 120 each) |
$960,000 |
|
Less cost: |
|
|
Variable production |
464,000 |
|
Sales commission (15% of sales) |
144,000 |
|
Salary of product line manager |
100,000 |
|
Fixed product line advertising |
160,000 |
|
Fixed manufacturing overhead |
132,000 |
|
Total cost |
1,000,000 |
|
Net operating loss |
$(40,000) |
Balser anticipates no change in the operating results for JYMP in the foreseeable future. Balser is re examining all of its productline and is trying to decide whether or not to discontinue the manufacture and sale of JYMP’s. Total fixed manufacturing overhead costs would not be affected by a decision to drop any one product line.
Assume that discontinuing the manufacture and sale of JYMP’s will have no effect on other product lines. If the company discontinues the JYMP product line, the change in annual operating income due to this decision