DM Corporation Has Provided You with the Following Budgeted Income

question 39

Multiple Choice

DM Corporation has provided you with the following budgeted income statement for one of their products:
$\begin{array}{|l|l|}\hline \text { Sales } & \$ 650,000 \\\hline \text { Variable expenses } & 455,000 \\\hline \text { Contribution margin } & \$ 195,000 \\\hline \text { Fixed expenses } & 240,000 \\\hline \text { Operating income } & (\$ 45,000) \\\hline\end{array}$

DM has just encountered environmental problems with the product and will be forced to drop the product line altogether. They will be able to eliminate 75% of the fixed expenses. What will the impact on operating income be?

• A) Down $45,000
• B) Down $15,000
• C) Up $8,500
• D) Up $7,500

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Definitions:

Normal Fault

A type of fault where the hanging wall slides downward relative to the footwall, typically caused by extensional forces.

Reverse Fault

A type of fault where the hanging wall moves upward relative to the footwall, typically associated with compressional stress.

Strike-Slip Fault

A type of fault where two blocks of Earth's crust slide past each other horizontally, often causing earthquakes.

Oblique-Slip Faults

Faults that combine features of both strike-slip and dip-slip faults, moving both horizontally and vertically.