(Answered) Question - considering dropping a product line with the

Accounting

Question - Considering dropping a product line with the following data:

Sales: $100,000

Variable Costs: $80,000

Contribution Margin: $20,000

Fixed Costs: $25000

Operating Loss: $5000

If the product line is dropped, $4000 of the fixed costs will be avoided and the freed up capacity would generate $4000 in additional contribution margin.

What will the effect on the overall income be if the product line is dropped? Please show steps.

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