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

question 120

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. Assuming Black Productions discontinues line F and is able to double the production and sales of model E without increasing fixed costs. What effect will this have on operating income?

• A)Increase $10,000
• B)Decrease $10,000
• C)Increase $26,000
• D)Decrease $26,000

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Definitions:

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A type of lubricant made from lithium soap, known for its high resistance to water and its use in automotive and industrial applications to reduce friction and protect against corrosion.

API GL-5

A classification of gear lubricant specified by the American Petroleum Institute, indicating it’s suitable for high-pressure conditions and hypoid gears, commonly used in automotive axles.

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