Kule,IncProduces Three Different Lines of Car Racks for Transporting Large,bulky

question 29

Multiple Choice

Kule,Inc.produces three different lines of car racks for transporting large,bulky items.

Total company net annual profit = $40,000 Included in the cost of goods sold is $12,000 of annual rent (a fixed cost) that is distributed equally among the three product lines.As a consultant to Kule,will you recommend that it drop the luggage rack line?

• A)No,dropping the line will actually decrease overall net profits.
• B)Yes,dropping the line will increase company net profits.
• C)No,dropping the line will result in increased fixed costs.
• D)Yes,dropping the line will reduce joint costs.
• E)Yes,dropping the line will reduce cost of goods sold and increase revenues.

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Definitions:

Rule of 72

A mathematical rule to estimate the number of years required to double an investment at a given annual fixed interest rate.

$10,000

A numerical figure representing a specific amount of money, notable in various financial contexts.

Cash Flows

signify the net amount of cash being transferred into and out of a business, crucial for assessing liquidity, flexibility, and overall financial health.

Net Present Value

A financial metric that calculates the value of a series of cash flows by discounting them to their present value, used to assess the profitability of investments.