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:

• A) $40 000
• B) $30 000
• C) $10 000
• D) $70 000

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