Question - Foto Company manufactures and sells a product called JYMP. Results from last year from the sale of JYMP appear below:
Sales revenue (8,000 JYMPs @ $120 each) $960,000
Variable costs 640,000
Contribution margin 320,000
Fixed costs:
Salaries of line supervisors 100,000
Advertising expense 132,000
Allocated general overhead 160,000
Net loss <72,000>
Foto Company is considering eliminating the JYMP product line. The company has determined that if the JYMP product line is discontinued, the contribution margin of its other products will increase by $120,000.
Calculate the increase in company profits if the JYMP product line is discontinued. Do not use decimals or type the word increase after your answer.