A Company Is Considering Eliminating a Product Line

question 115

Multiple Choice

A company is considering eliminating a product line. The fixed costs currently allocated to the product line will be allocated to other product lines upon discontinuance. If the product line is discontinued

• A) total net income will increase by the amount of the product line's fixed costs.
• B) total net income will decrease by the amount of the product line's fixed costs.
• C) the contribution margin of the product line will indicate the net income increase or decrease.
• D) the company's total fixed costs will decrease.

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Definitions:

Mortgage

A legal agreement by which a bank or creditor lends money at interest in exchange for taking title of the debtor's property, with the condition that the conveyance of title becomes void upon the payment of the debt.

Innocent Misrepresentation

A false statement made by someone who believes it to be true, leading to a contractual agreement that can be voided.

Remedies

Legal means for enforcing a right or redressing a wrong, including monetary damages and specific performance.

Parol Evidence Rule

A legal principle that prevents parties in a contract dispute from presenting evidence of prior or concurrent oral agreements that would contradict the written terms of the contract.