Momentum Rollerblades Has Three Product Lines-D,E,and F The Company Is Deciding Whether to Drop Product Line F

question 41

Multiple Choice

Momentum Rollerblades has three product lines-D,E,and F.The following information is available: $\begin{array}{|l|r|r|r|} \hline& \mathrm{D} & \mathrm{E} & \mathrm{F} \\\hline \text { Sales revenue } & \$ 80,000 & \$ 60,000 & \$ 31,000 \\\hline \text { Variable costs } & (30,000 & (15,000 & (12,000) \\\hline \text { Contribution margin } & \$ 50,000 & \$ 45,000 & \$ 19,000 \\\hline \text { Fixed costs } & (10,000) & (5000) & (23,000) \\\hline \text { Operating income (loss) } & \$ 40,000 & \$ 40,000 & \$(4000) \\\hline\end{array}$ The company is deciding whether to drop product line F because it has an operating loss.Assume that $22,000 of total fixed costs could be eliminated by dropping F.What effect would this decision have on operating income?

• A) Operating income will increase by $23,000.
• B) Operating income will increase by $3000.
• C) Operating income will decrease by $23,000.
• D) Operating income will decrease by $3000.

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Definitions:

Cultural Adaptation

The adjustment process individuals undergo to integrate with or accommodate themselves to different cultural practices and settings.

Business Practices

Customary methods or procedures in the conduct of business activities.

Socialize

The process by which individuals learn the norms, values, and practices of a social group to integrate and function within it.

Hofstede's Dimensions

A framework for cross-cultural communication developed by Geert Hofstede, that describes the effects of a society's culture on the values of its members, and how these values relate to behavior.