The Tangier Company Is Considering Eliminating the Following Product Line

question 98

Multiple Choice

The Tangier Company is considering eliminating the following product line: $$\begin{array} { | l | l r | } \hline & { \text { Product AXP } } \\\hline \text { Sales } & \$ 80,000 \\\hline \text { Less variable costs: } & & \\\hline \text { Raw materials } & 50,000 \\\hline \text { Direct labor } & 10,000 \\\hline \text { Contribution margin } & \$ 20,000 \\\hline \text { Less fixed costs: } & \\\hline \text { Production costs allocated to products } & 30,000 \\\hline \text { Profit (Loss) } & \$ ( 10,000 ) \\\hline\end{array}$$ What amount of cost is avoidable if Tangier outsources production of this product?

• A) $60,000
• B) $50,000
• C) $90,000
• D) $20,000

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Definitions:

Tax Treatment

The manner in which an item or transaction is taxed by authorities, affecting how it is reported and what deductions or credits may apply.

Limited Liability

A legal structure for businesses where owners' personal assets are protected from the company's debts and liabilities.

Objectivity

The principle of being unbiased and based on observable phenomena, ensuring that personal feelings or opinions do not affect data collection and interpretation.

Financial Information

Data related to the financial status of an entity, including assets, liabilities, revenues, and expenses, which is used for analysis and decision-making.