Moore Manufacturing Has Two Major Product Lines, Gidgets and Gadgets

question 3

Multiple Choice

Moore Manufacturing has two major product lines, Gidgets and Gadgets. Income statements for the two product lines follow: If the Gidget product line were dropped, all of its product line fixed costs could be avoided. Should the Gidget product line be dropped, and why?

• A) Yes, profits increase $75,000
• B) No, profits decrease $45,000
• C) No, profits decrease $55,000
• D) No, profits decrease $175,000

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Definitions:

Total Asset Turnover

A financial measure that calculates the ability of a company to turn its assets into sales revenue.

Return On Total Assets

A financial ratio that measures a company's ability to generate profit from its assets.

Return On Total Assets

A measure of a company's profitability relative to its total assets, indicating how effectively it uses its assets to generate earnings.

Return On Common Stockholders' Equity

A financial ratio that measures the amount of net income returned as a percentage of shareholders' equity, indicating the profitability of a company from the shareholders' perspective.