Corn Crunchers Has Three Product Lines

question 28

Multiple Choice

Corn Crunchers has three product lines. Its only unprofitable line is Corn Nuts, the results of which appear below for 2013: If this product line is eliminated, 30% of the fixed expenses can be eliminated. How much are the relevant costs in the decision to eliminate this product line?

• A) $180,000
• B) $1,520,000
• C) $1,340,000
• D) $1,100,000

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Definitions:

Compounded Annually

Interest on an investment that is calculated once a year on both the initial principal and the accumulated interest from previous periods.

Compounded Monthly

A method of calculating interest where the interest earned each month is added to the principal, so that the balance grows at an increasing rate.

Compounded Annually

A method of calculating interest in which the accumulated interest is added to the principal at the end of each year, resulting in interest on interest in successive years.

Compounded Annually

Interest on a loan or mortgage calculated on an annual basis, where interest from previous periods also earns interest in subsequent periods.