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Question(s) / Instruction(s):

A study has been conducted to determine if one of the departments in Parry Company should be discontinued. The contribution margin in the department is $50,200 per year. Fixed expenses charged to the department are $65,300 per year. It is estimated that $38,600 of these fixed expenses could be eliminated if the department is discontinued. These data indicate that if the department is discontinued, the companys overall net operating income would:

a)            increase by $26,700 per year

b)            increase by $11,600 per year

c)            decrease by $11,600 per year

d)            decrease by $26,700 per year

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