Overland Company Is Planning on Discontinuing One of Its Markets

question 4

Multiple Choice

Overland Company is planning on discontinuing one of its markets in Japan. The Japanese market has a contribution margin of $33,000. Fixed costs for the Japanese market are $55,000, 70% of which are unavoidable. What will be the effect on Overland's net income if the Japanese market is eliminated?

• A) Increase by $33,000
• B) Decrease by $33,000
• C) Increase by $16,500
• D) Decrease by $16,500

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Definitions:

Expected Return

The predicted amount of profit or loss an investment generates based on historical performance or analyst forecasts.

Risk-Free Rate

The theoretical rate of return of an investment with zero risk, often represented by the yield of government securities.

Market Risk

The possibility of an investor experiencing losses due to factors that affect the overall performance of the financial markets.

Specific Companies

Refers to individual firms or corporations identified by their unique characteristics, operations, or market activities.