Question
Diamond Company has three product lines, A, B, and C. The following financial Information is available: Item Sales Variable costs Contribution margin Fixed costs:
Diamond Company has three product lines, A, B, and C. The following financial Information is available: Item Sales Variable costs Contribution margin Fixed costs: Avoidable Product Line A Product Line B $30,000 $45,000 $18,000 $12,000 $24,000 $21,000 Product Line C $12,000 $ 7,500 $ 4,500 $ 4,500 $ 9,000 $ 3,000 Unavoidable Pre-tax operating income $ 3,000 $ 4,500 $ 2,000 $ 4,500 $ 7,500 $ (500) Diamond is thinking of dropping Product Line C because it is reporting an operating loss. Assuming the company drops Product Line C and does not replace it, pre-tax operating Income for the firm will likely:
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