Shine Bright Company Has Three Product Lines: D, E, and F

question 144

Multiple Choice

Shine Bright Company has three product lines: D, E, and F. The following information is available:
$$\begin{array} { | l | r | r | r | } \hline & \text { D } & \text { E } &{ \text { F } } \\\hline \text { Sales } & \$ 60,000 & \$ 38,000 & \$ 26,000 \\\hline \text { Variable costs } & 36,000 & 18,000 & 12,000 \\\hline \text { Contribution margin } & 24,000 & 20,000 & 14,000 \\\hline \text { Fixed experses } & 12,000 & 15,000 & 16,000 \\\hline \text { Operating income (loss) } & \$ 12,000 & \$ 5,000 & \$ ( 2,000 ) \\\hline\end{array}$$
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Shine Bright Company is thinking of dropping product line F because it is reporting an operating loss. Assume that $15,000 of total fixed costs could be eliminated by dropping F. What effect would this decision have on operating income?

• A) Operating income will increase $3,000.
• B) Operating income will increase $1,000.
• C) Operating income will decrease $6,000.
• D) Operating income will decrease $3,000.

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Definitions:

Group Polarization

The phenomenon where discussions within a cohesive group lead to the adoption of more extreme positions or attitudes than initially held by individual group members.

Racially Prejudiced

Holding prejudgment, bias, or discrimination against individuals based on their race or ethnicity.

Just-world Phenomenon

The cognitive bias that assumes good things happen to good people and bad things happen to bad people.

Groupthink

A psychological phenomenon that occurs within a group of people, where the desire for harmony and conformity results in irrational or dysfunctional decision-making outcomes.