Lusk Corporation produces and sells 13,700 units of Product X each month. The selling price of Product X is $19 per unit, and variable expenses are $13 per unit. A study has been made concerning whether Product X should be discontinued. The study shows that $72,000 of the $102,000 in monthly fixed expenses charged to Product X would not be avoidable even if the product was discontinued. If Product X is discontinued, the annual financial advantage (disadvantage) for the company of eliminating this product should be:

a. increase by $49,800 per month
b. decrease by $52,200 per month
c. decrease by $49,800 per month
d. increase by $19,800 per month

If Product X is discontinued, the annual financial disadvantage for the company of eliminating this product will be: decrease by $82,200 per month.

Explanation:

Total sales of Product X = $19 x 13,700 = $260,300

Total variable expenses of Product X = $13 x 13,700 = $178,100

Total sales of Product X - Total variable expenses of Product X = $260,300 - $178,100 = $82,200

$72,000 of the $102,000 in monthly fixed expenses charged to Product X would not be avoidable even if the product was discontinued.

Therefore, if Product X is discontinued, the annual financial disadvantage for the company of eliminating this product will be: decrease by $82,200 per month.

month 1 start amount =$3287.90 interest=(3287.90x0.0145/12)3.97 total to pay=$3291.81 paid =$1200 balance =$2,091.87

month 2 starting amount= $2,091.87 interest =$25.28 total to pay =$2117.15 paid =$1200 balance $917.15

month 3 starting amount =$917.15 interest =$11.08 total to pay =$928.23 paid =$928.23 balance =$0 total to pay 1200+1200+928.23 = $3328.23 it will take 3 months to pay a total of $3328.23

i'ts proportional. if the inflation rate is 12% for example, the cpi will be 12% less.

hope it ,

bioteacher101