A Study Has Been Conducted to Determine If Product a Should

question 40

Multiple Choice

A study has been conducted to determine if Product A should be dropped. Sales of the product total $200,000 per year; variable expenses total $140,000 per year. Fixed expenses charged to the product total $90,000 per year. The company estimates that $40,000 of these fixed expenses will continue even if the product is dropped. These data indicate that if Product A is dropped, the company's overall net operating income would:

• A)decrease by $20,000 per year.
• B)increase by $30,000 per year.
• C)decrease by $10,000 per year.
• D)increase by $20,000 per year.

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Definitions:

Mistake

An erroneous belief, at contracting, that certain facts are true. It can be invoked as grounds to invalidate the agreement.

Fraudulent Misrepresentation

Intentional false statement of fact made by one party to deceive and induce another to enter into a contract.

Vehicle Dealer

A business authorized to sell new or used vehicles to consumers while meeting certain legal and manufacturer requirements.

Capability

The ability or attributes required to perform tasks or achieve certain results effectively.