DM Corporation Has Provided You with the Following Budgeted Income

question 142

True/False

DM Corporation has provided you with the following budgeted income statement for one of their products:
$$\begin{array} { | l | r | } \hline \text { Sales } & \$ 650,000 \\\hline \text { Variable Expenses } & 455,000 \\\hline \text { Contribution margin } & \$ 195,000 \\\hline \text { Fixed Expenses } & 240,000 \\\hline \text { Operating income } & ( \$ 45,000 ) \\\hline\end{array}$$
DM Corporation believes that 70% of the fixed costs would be avoidable if the product line was dropped. Based on impact to the company operating income, DM should NOT drop the product line.

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Definitions:

Accuracy of Prediction

The degree to which a prediction matches the actual outcomes.

Criterion Variable

The dependent variable in a study or analysis that the independent variables aim to predict.

Aptitude Test

A standardized test designed to measure an individual's potential to acquire certain skills or knowledge.

Expected Performance

Anticipated or forecasted level of achievement or output based on certain criteria or conditions.