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    Impact of discontinuance on net operating income

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    Gata company plans to discontinue a department that has a $48,000 contribution margin and $96,000 of fixed costs. Of these fixed costs, $42,000 cannot be avoided. What would be the effect of this discontinuance on Gata's overall net operating income?

    A) Increase of $48,000 C) Increase of $6,000
    B) Decrease of $48,000 D) Decrease of $6,000

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    Solution Summary

    This explains the impact of discontinuance on net operating income.