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Carrie Corporation makes three products: a standard model, a deluxe model, and a luxury model. The financial statements of the products are as follows: Standard

Carrie Corporation makes three products: a standard model, a deluxe model, and a luxury model. The financial statements of the products are as follows:

Standard Model

Deluxe Model

Luxury Model

Total

Sales revenue

$

90,000

$

70,000

$

50,000

$

210,000

Variable costs

30,000

35,000

25,000

90,000

Contribution margin

60,000

35,000

25,000

120,000

Less fixed costs:

Salaries

12,000

20,000

4,000

36,000

Rent

10,000

10,000

10,000

30,000

Administrative

20,000

10,000

8,000

38,000

Operating profit (loss)

$

18,000

$

(5,000

)

$

3,000

$

16,000

If the deluxe model product line was discontinued, all variable costs for that line could be avoided and $10,000 of the salaries associated with that model could be avoided. The other fixed costs are unavoidable. If the deluxe model product line is dropped, how will the company's operating profit be impacted?

Multiple Choice

A $10,000 increase

B $5,000 increase

C $25,000 decrease

D $15,000 decrease

E None of these.

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