Balser Corporation Manufactures and Sells a Number of Products, Including

question 25

Multiple Choice

Balser Corporation manufactures and sells a number of products, including a product called JYMP. Results for last year for the manufacture and sale of JYMPs are as follows: Balser is trying to decide whether to discontinue the manufacture and sale of JYMPs. All expenses other than fixed manufacturing overhead are avoidable if the product is dropped. None of the fixed manufacturing overhead is avoidable.Assume that dropping Product JYMP would result in a $90,000 increase in the contribution margin of other products. If Balser chooses to discontinue JYMP, the annual financial advantage (disadvantage) of eliminating this product should be:

• A) ($40,000)
• B) $40,000
• C) ($2,000)
• D) $50,000

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Definitions:

Dozen Oysters

A quantity of oysters amounting to 12 units, often used in the context of serving or purchasing seafood.

Total Utility

The overall satisfaction or benefit a consumer receives from consuming a certain quantity of goods or services.

Beers

A wide variety of alcoholic beverages made from barley, hops, water, and yeast through a brewing process.

Marginal Utility

The additional satisfaction or usefulness obtained from acquiring or consuming one more unit of a product or service.