A Company Has Three Product Lines, One of Which Reflects

question 78

Multiple Choice

A company has three product lines, one of which reflects the following results: $$\begin{array} { l r } \text { Sales } & \$ 215,000 \\\text { Variable expenses } & 125,000 \\\text { Contribution margin } & 90,000 \\\text { Fixed expenses } & 130,000 \\\text { Net loss } & \$ ( 40,000 ) \end{array}$$ 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:

Peptidoglycan

A complex polymer found in the cell walls of most bacteria, providing structural strength and shape.

Waxy Cell Wall

A waxy cell wall is characteristic of plant cells and some microorganisms, providing a protective, waterproof layer.

Mycoplasma

A genus of bacteria that lack a cell wall, making them resistant to many common antibiotics and causing various diseases in humans and animals.

Peptidoglycan

A polymer that makes up the cell walls of most bacteria, consisting of sugars and amino acids, and provides structural strength to the bacterial cell wall.