Riverside Industries Has Three Product Lines, A, B, and C

question 54

Multiple Choice

Riverside Industries has three product lines, A, B, and C. The following information is available: $$\begin{array} { l l l l } & \underline { \mathrm { A } } & \underline { \mathrm { B } } & \underline { \mathrm { C } } \\\text { Sales } & \$ 100,000 & \$ 90,000 & \$ 44,000 \\\text { Variable costs } & 76,000 & 48,000 & 35,000 \\\text { Contribution } & \$ 24,000 & \$ 42,000 & \$ 9,000 \\\text { margin } & & & \\\text { Fixed costs: } & & & \\\text { Avoidable } & 9,000 & 18,000 & 3,000 \\\text { Unavoidable } & \underline { 6,000 } & \underline { 9,000 } & \underline { 7,700 } \\\text { Op erating inc ome } & \underline { \$ 9,000 } & \$ 15,000 & (\$ 1,700 ) \end{array}$$ Riverside Industries is thinking of dropping product line C because it is reporting a loss. Assuming Riverside drops line C and does not replace it, the operating income will:

• A) increase by $600
• B) decrease by $6,000
• C) increase by $2,400
• D) decrease by $9,000