Question
Rings Company has three product lines, A, B, and C. The following financial information is available: Item Product Line A Product Line B Product Line
Rings Company has three product lines, A, B, and C. The following financial information is available:
| Item | Product Line A | Product Line B | Product Line C |
| Sales | $ 50,000 | $ 95,000 | $ 22,000 |
| Variable costs | $ 30,000 | $ 51,000 | $ 13,750 |
| Contribution margin | $ 20,000 | $ 44,000 | $ 8,250 |
| Fixed costs: | |||
| Avoidable | $ 5,300 | $ 14,000 | $ 6,000 |
| Unavoidable | $ 4,000 | $ 9,500 | $ 3,000 |
| Pre-tax operating income | $ 10,700 | $ 20,500 | $ (750) |
Rings 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, pretax operating income for the firm will likely:
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Modern Advanced Accounting In Canada
Authors: Murray Hilton
6th Edition
0070001537, 978-0070001534
