Question
Diamond Company has three product lines, A, B, and C. The following financial information is available: ItemProduct Line AProduct Line BProduct Line CSales$60,000$120,000$27,000Variable costs$36,000$64,000$16,875Contribution margin$24,000$56,000$10,125Fixed
Diamond Company has three product lines, A, B, and C. The following financial information is available:
ItemProduct Line AProduct Line BProduct Line CSales$60,000$120,000$27,000Variable costs$36,000$64,000$16,875Contribution margin$24,000$56,000$10,125Fixed costs:Avoidable$5,800$16,500$7,500Unavoidable$4,500$12,000$3,500Pre-tax operating income$13,700$27,500$(-875)
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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Intermediate Accounting
Authors: J. David Spiceland, James Sepe, Mark Nelson
6th edition
978-0077328894, 71313974, 9780077395810, 77328892, 9780071313971, 77395816, 978-0077400163
