San Bernardino Industries Has Three Product Lines, A, B, and C.The

question 90

Multiple Choice

San Bernardino Industries has three product lines, A, B, and C.The following information is available: $\begin{array}{lrrr}&A&B&C\\\text { Sales } & \$ 100,000 & \$ 90,000 & \$ 88,000 \\\text { Variable costs } & \underline{76,000} & \$ 8,000 & {79,000} \\\text { Contribution margin } & \$ 24,000 & \$ 42,000 & \$ 9,000\\\text { Fixed costs: } & & & \\\text { Avoidable } & 9,000 & 18,000 &3,000\\\text { Unavoidable } & \underline{6,000} & 9,000&9,400 \\\text { Operating income } & \$ 9,000 & \$ 15,000&\$3,400) \end{array}$ Assuming product line C is discontinued and the space formerly used to produce product C is rented for $15,000 per year, operating income will increase _____.

• A)$6,600
• B)$9,000
• C)$15,000
• D)$14,400

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Definitions:

Emissions

The release of substances (like gases, heat, light, sound, or particles) into the atmosphere or environment, often associated with pollution.

Fee

A payment made to a professional person or to a professional or public body in exchange for advice or services.

Standard

An established measure or model that is used for comparison in evaluating the quality, performance, or compliance of various entities.

Externality

Action by either a producer or a consumer which affects other producers or consumers, but is not accounted for in the market price.