Abel Company Produces Three Versions of Baseball Bats: Wood, Aluminum

question 149

Multiple Choice

Abel Company produces three versions of baseball bats: wood, aluminum, and hard rubber.A condensed segmented income statement for a recent period follows: $\begin{array}{lrrrr}&\text { Wood }&\text { Aluminum }&\text { Hard Rubber }&\text { Total }\\\text { Sales } & \$ 500,000 & \$ 200,000 & \$ 65,000 & \$ 765,000 \\\text { Variable expenses } & 325,000 & 140,000 & 58,000 & 523,000 \\\text { Contribution margin } & 175,000 & 60,000 & 7,000 & 242,000 \\\text { Fixed expenses } & 75,000 & 35,000 & 22,000 & 132,000 \\\text { Net income (loss) }&\$100,000&\$25,000&\$(15,000) &\$110,000\end{array}$ Assume all of the fixed expenses for the hard rubber line are avoidable.What will be total net income if the line is dropped?

• A)$125,000
• B)$103,000
• C)$105,000
• D)$140,000

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Definitions:

Expanded Bureaucracy

Increased complexity and expansion of organizational structures and procedures often resulting in inefficiency.

Modular Organizations

Organizations structured in such a way that they can be easily reorganized, adapted, or resized by adding or removing modules, or discrete units, without affecting the overall system.

Strategic Control

The process of monitoring and adjusting a company's strategy in response to changing internal and external conditions.

Innovative Unit

A subgroup or department within an organization dedicated to developing new ideas, products, or processes.