Question
Macaulay Company has three product lines?D, E, and F. The following information is available: Macaulay Company is thinking of dropping product line F because it
Macaulay Company has three product lines?D, E, and F. The following information is available:
Macaulay Company is thinking of dropping product line F because it is reporting an operating loss. Assuming fixed costs are unavoidable, if Macaulay Company drops product line F and does not replace it, what effect will this have on operating income?
A) Operating income will increase $5,000.
B) Operating income will increase $20,000.
C) Operating income will increase $25,000.
D) Operating income will decrease $20,000.
Sales Variable costs Contribution margin Fixed expenses Operating income (loss) D $70,000 (40,000) 30,000 (15,000) $15,000 E $40,000 (20,000) 20,000 (15,000) $5,000 F $30,000 (10,000) 20,000 (25,000) ($5,000)
Step by Step Solution
3.40 Rating (159 Votes )
There are 3 Steps involved in it
Step: 1
D Operating income will decrease 20000 Explanation ...Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get StartedRecommended Textbook for
Advanced Financial Accounting
Authors: Thomas Beechy, Umashanker Trivedi, Kenneth MacAulay
6th edition
013703038X, 978-0137030385
Students also viewed these Accounting questions
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
View Answer in SolutionInn App