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Paxton Products Has Three Product Lines: A,B,and C Management Is Considering Dropping Product Line B

question 48

Multiple Choice

Paxton Products has three product lines: A,B,and C.
$\begin{array}{lr}&\underline{\text { A }} &\underline{\text { B }} &\underline{ \text { C }} &\underline{ \text { Total }}\\ \text { Sales } &\$90000&\$150000&\$200000&\$440000\\ \text { Variable costs } &\underline{50000}&\underline{120000}&\underline{100000}&\underline{270000}\\ \text {Contribution margin } &40000&30000&100000&170000\\ \text { Fixed costs} &\underline{15000}&\underline{40000}&\underline{50000}&\underline{105000}\\ \text { Net income} &\underline{\$25000}&\underline{\$10000}&\underline{\$(50000) }&\underline{\$65000}\\ \text { } &\\\end{array}$

Management is considering dropping product line B.In order for the dropping of product line B to not cause an overall decrease in profits,product line B's avoidable fixed costs should be at least:

Recognize the importance of supplier selection based on quality, price, dependability, and services.

Acknowledge the significance of inventory management systems, including just-in-time (JIT) systems, in reducing waste and enhancing efficiency.

Understand the strategic decision-making process involved in purchasing, leasing, and negotiating with suppliers.

Understand the purpose and application of a PERT diagram.

Definitions:

Optimal Quantity

The amount of a product or service that maximizes efficiency, balancing costs and benefits to achieve the best possible outcome.

Optimal Tax Rate

The tax rate that efficiently balances revenue generation for government purposes with minimal economic distortion or disincentive for economic activity.

Marginal Social Benefit

The increased value to society resulting from the consumption or production of one more unit of a good or service.

External Benefit

A benefit that affects people other than the direct consumers or producers of a good or service, often leading to positive spillover effects.