What happen to operating income if baby formula manufactured

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Reference no: EM133901487

Problem

You're evaluating products to potentially discontinue manufacturing. Use the following information to determine whether it makes sense to stop manufacturing any of your products: 1. Which product should be discontinued, why? 2. Only $25,000 of fixed costs can be eliminated if the product is discontinued. The remaining fixed costs for the product are unavoidable. What are the remaining fixed costs for the product? What will happen to operating income if the underperforming product is discontinued and nothing is done with the freed capacity. 3. Management is thinking about taking the freed capacity from discontinuing their prior product, to create baby formula. Sales of baby formula are expected to bring in $100,000 of contribution margin, with an addition $30,000 in fixed costs. Get the instant assignment help. What will happen to operating income if baby formula is manufactured with the freed capacity?

Reference no: EM133901487

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