Question
Pirate Company's management is considering dropping its small television product line due to continued operating losses. Pirate has forecasted an operating loss of $25,000 for
Pirate Company's management is considering dropping its small television product line due to continued operating losses. Pirate has forecasted an operating loss of $25,000 for the upcoming year. Fixed expenses for the upcoming year are forecasted at $45,000, of which $30,000 is considered to be avoidable. Should Pirate Company drop the small television product line?
A. Yes, because the avoidable fixed costs exceed the contribution margin that would be lost
B. Yes, because of the forecasted operating loss of $25,000
C. No, because the unavoidable fixed xosts are less than the forecasted operating loss
D. No, because the contribution margin that would lost exceeds the $45,000 of fixed costs
Step by Step Solution
There are 3 Steps involved in it
Step: 1
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 Started