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Assume that the company is considering eliminating the Suprema product with the hopes of boosting sales of its more expensive product. Only $270,000 of the total fixed costs are directly attributable to the Suprema product. The marketing manager estimates that sales of the Best product would increase by 25% if consumers did not have the option of buying the lower end product. In addition, the space currently used for the Suprema model could be used to store finished goods inventory. The company is currently paying $75,000 a year for a finished goods warehouse. How much would net operating income increase or decrease if the Suprema product is eliminated?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M938157

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