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

question 115

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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