Giant Company Has Three Products, A, B, and C

question 56

Multiple Choice

Giant Company has three products, A, B, and C. The following information is available:

Giant Company is thinking of dropping Product C because it is reporting a loss. Assuming Giant drops Product C and does NOT replace it, operating income will ________.

• A) increase by $3,400
• B) increase by $2,000
• C) decrease by $6,000
• D) decrease by $11,400

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Definitions:

Accounting Measurements

The process of quantifying financial information in dollars or units to report financial position and performance.

Revenue Recognition

The accounting principle that deals with the conditions under which revenue is recognized and recorded on the financial statements.

Installment Method

An accounting method used to recognize revenue and expenses on long-term contracts and other sales where payment is received in installments.

Qualitative Characteristic

Features or attributes that describe the non-numeric aspects of goods, services, processes or information, often related to quality.