Draper Corporation is considering discontinuing the Doom bug toy due to continued losses. Data on the toy for the past year are as follows:

15,000 units sold $150,000

Variable expenses 120.000

Contribution 30.000

Fixed expenses 40.000

Net operating loss $10,000

If the toy is discontinued, Draper could avoid fixed costs by $8,000 a year. The rest of the fixed costs are not inevitable.

Let's say if the Doom bug toy is dropped, production and sales of other Draper toys will increase, resulting in a $16,000 increase in contribution margin from those other toys.

If all other conditions are the same, what will be the financial advantage (disadvantage) of stopping the production and sale of Doom bugs ?

Answer rating: 100% (QA)

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