Question
Carlton Products has three product lines: A, B, and C. A B C Total Sales $500,000 $550,000 $700,000 $1,750,000 Variable costs 280,000 420,000 300,000 1,000,000
Carlton Products has three product lines: A, B, and C.
A | B | C | Total | ||||
Sales | $500,000 | $550,000 | $700,000 | $1,750,000 | |||
Variable costs | 280,000 | 420,000 | 300,000 | 1,000,000 | |||
Contribution margin | 220,000 | 130,000 | 400,000 | 750,000 | |||
Fixed costs | 100,000 | 140,000 | 150,000 | 390,000 | |||
Net income | $120,000 | $ (10,000) | $250,000 | $ 360,000 |
42. Management is considering dropping product line B. If it is discontinued, all of its fixed costs are AVOIDABLE. The discontinuation of product line B would:
a. | decrease net income $10,000. |
b. | increase net income $130,000. |
c. | decrease net income $130,000. |
d. | increase net income $10,000. |
43. Management is considering dropping product line B. If it is discontinued, all of its fixed costs are UNAVOIDABLE. The discontinuation of product line B would:
a. | decrease net income $10,000. |
b. | increase net income $130,000. |
c. | decrease net income $130,000. |
d. | increase net income $10,000. |
44. Management is considering dropping product line B. If it is discontinued, (1) $100,000 of its fixed costs are DTFCand (2) sales of product line C are increased by 60%. The discontinuation of product line B would:
a. | decrease net income $6,000. |
b. | increase net income $106,000. |
c. | decrease net income $106,000. |
d. | increase net income $6,000. |
45. Management is considering dropping product line B. If it is discontinued, (1) $100,000 of its fixed costs are COMMON FCand (2) the selling price of product line A is increased by 10%. The discontinuation of product line B would:
a. | decrease net income $90,000. |
b. | increase net income $40,000. |
c. | decrease net income $40,000. |
d. | increase net income $90,000. |
46. A factor to consider regarding a special order is the
a. | variable costs associated with the special order |
b. | avoidable fixed costs associated with the special order |
c. | effect the sale of special-order units will have on the sale of regularly priced units |
d. | incremental revenue from the special order |
e. All of the above
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