Ram Co. is trying to decide whether or not to discontinue one of its products, slow cookers. Last year's sales and expenses for slow cookers are as follows:

 

Sales		$65,000
Less expenses:
Variable costs	$35,000
Fixed costs	48,000	83,000
Net operating loss		$(18,000)

 

 

If slow cookers are discontinued, 75% of the fixed costs can be avoided. At the same time, discontinuing slow cookers will have no effect on other products. What is the financial advantage or disadvantage of discontinuing slow cookers? 

 

Multiple Choice

• $17,000 financial advantage

• $4,000 financial disadvantage

• $6,000 financial advantage

• $13,000 financial disadvantage