M Limited produces and sells two distinct colours of paint. The actual figures below relate to last year: For red paint: - revenue: $350\,000$ - direct materials and labour: $180\,000$ - allocated fixed overheads: $110\,000$ - profit/(loss): $60\,000$ For blue paint: - revenue: $150\,000$ - direct materials and labour: $65\,000$ - allocated fixed overheads: $88\,000$ - profit/(loss): $-3\,000$ Overall: - revenue: $500\,000$ - direct materials and labour: $245\,000$ - allocated fixed overheads: $198\,000$ - profit: $57\,000$ The company is thinking about shutting the blue paint department and using the freed space to raise revenue from red paint by $20\%$. Variable costs will rise in the same ratio as the rise in revenue. What is the resulting change in total profit if this plan is implemented?
- A$3000 increase
- B$29\,000 increase
- C$51\,000 decrease
- D$85\,000 decrease