Alta Loma Industries Has Three Product Lines, A, B, and C.The

question 10

Multiple Choice

Alta Loma Industries has three product lines, A, B, and C.The following information is available: $\begin{array}{lrrr}&A&B&C\\\text { Sales } & \$ 100,000 & \$ 90,000 & \$ 36,000 \\\text { Variable costs } & \underline{76,000} & 48,000 & \underline{27,000} \\\text { Contribution margin } & \$ 24,000 & \$ 42,000 & \$ 9,000 \\\text { Fixed costs: } & & &\\\text { Avoidable } & 9,000 & 18,000 & 3,000 \\\text { Unavoidable } & \underline{6,000} & \underline{9,000} & \underline{8,400} \\\text { Operating income } & \underline{\$ 9,000} & \$ 15,000 & \$ 2,400\end{array}$ Assume that product line C is discontinued and replaced with product line B.This will double the production and sales of product line B without increasing fixed costs.Operating income will increase _____.

• A)$15,000
• B)$42,000
• C)$24,000
• D)$36,000