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 $90,000 Less expenses Variable costs $56,000 Fixed costs 40,000 96,000 Net operating loss $(6,000) If slow cookers are discontinued, 75 of...

Current situation of Ram company Sales 90000 Less Varia ...

Ram Co. is trying to decide whether or not to discontinue one of its products, slow cookers.

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Question:

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		$90,000
Less expenses:
Variable costs	$56,000
Fixed costs	40,000	96,000
Net operating loss		$(6,000)

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