Black Productions Has Three Models: D, E, and F

question 221

Multiple Choice

Black Productions has three models: D, E, and F. The following information is available: Black Productions is thinking of discontinuing model F because it is reporting an operating loss. All fixed costs are unavoidable. Black Productions discontinues model F and rents the space formerly used to produce product F for $15,000 per year, what effect will this have on operating income?

• A)Increase $21,000
• B)Increase $5,000
• C)Decrease $21,000
• D)Decrease $5,000

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Definitions:

Lessee

An entity or individual that leases or rents property or equipment from another.

Operating Lease

A leasing agreement allowing a lessee to use an asset without owning it, typically with shorter terms than a capital lease.

Ownership

The legal right or interest in something, often involving assets like property, businesses, or investments.

Contract Rate

The agreed-upon interest rate specified in a contract, such as in loans, leases, or bonds.