A Company Has Three Product Lines, One of Which Reflects

question 20

Multiple Choice

A company has three product lines, one of which reflects the following results: $\begin{array}{lr}\text { Sales } & \$ 215,000 \\\text { Variable expenses } & 125,000 \\\text { Contribution margin } & 90,000 \\\text { Fixed expenses } & 130,000 \\\text { Net loss } & \$(40,000) \end{array}$ If this product line is eliminated, 60% of the fixed expenses can be eliminated and the other 40% will be allocated to other product lines. If management decides to eliminate this product line, the company's net income will

• A)increase by $40,000.
• B)decrease by $90,000.
• C)decrease by $12,000.
• D)increase by $12,000.

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Definitions:

Statistical Analysis

Involves mathematical techniques for collecting, reviewing, analyzing, and drawing conclusions from data.

Experimental Design Validity

Using experimentation to show that a test measures a specific concept or construct. It is a type of construct validity.

Discriminant Validity

The measure of how much a test does not relate to variables or measures it should not be associated with.

Correlation Coefficient

The relationship between two sets of scores. Correlation coefficients range from +1 to -1 and generally are reported in decimals of one-hundredths. A positive correlation shows a tendency for scores to be related in the same direction, while a negative correlation indicates an inverse relationship.