Assume that discontinuing the manufacture and sale of Product J will not affect the sale of other products. If the company discontinues Product J, the change in annual net income due to this decision will be a:

A) $145,000 increase.
B) $25,000 decrease.
C) $315,000 decrease.
D) $170,000 decrease.

Discontinuing Product J would eliminate its variable costs and the traceable fixed costs but not the allocated fixed general factory overhead, which would remain unchanged. The relevant costs to eliminate are the variable production costs ($960,000), sales commissions (15% of $1,600,000 = $240,000), salaries of line supervisors ($195,000), and traceable fixed advertising expense ($180,000), totaling $1,575,000. However, discontinuing the product would also eliminate its sales of $1,600,000, resulting in a net decrease in income of $25,000 ($1,600,000 - $1,575,000).