Q7.37: Sprockets Inc. makes three models of gears: small, medium, and large. Condensed income statement...
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Q7.37: Sprockets Inc. makes three models of gears: small, medium, and large. Condensed income statement data related to the three models are as follows: Small Medium Large Total Sales Variable costs Cont. margin Fixed costs Net income $608,000 147,000 461,000 289,000 $172,000 $712,000 $350,000 $1,670,000 438,000 523,000248,0001,232,000 865,000 $214,000| ($ 19,000) $367,000 189,000 102,000 309,000 267,000 Sprockets is considering discontinuing the large gear. If it does so, 70% of its fixed costs would be eliminated. What would happen if Sprockets stops manufacturing the large gear? A The firm's net income would drop by $61,100 B The firm's net income would drop by $167,900 C The firm's net income would increase by $186,900 D The firm's net income would increase by $80,100
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