A Study Has Been Conducted to Determine If Product a Should

question 402

Multiple Choice

A study has been conducted to determine if Product A should be dropped. Sales of the product total $500,000; variable expenses total $340,000. Fixed expenses charged to the product total $210,000. The company estimates that $60,000 of these fixed expenses are not avoidable even if the product is dropped. If Product A is dropped, the annual financial advantage (disadvantage) for the company of eliminating this product should be:

• A) ($10,000)
• B) $10,000
• C) ($50,000)
• D) $50,000

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