The Clemson Company Reported the Following Results Last Year for the Manufacture

question 100

Multiple Choice

The Clemson Company reported the following results last year for the manufacture and sale of one of its products, known as a Tam:
$\begin{array}{|l|r|}\hline \text { Sales (6.500 Tams at } \$ 130 \text { each) } & \$ 845,000 \\\hline \text { Variable Cost of Sales } & \$ 390,000 \\\hline \text { Variable Distribution Costs } & \$ 65,000 \\\hline \text { Fixed Adertising Expense } & \$ 275,000 \\\hline \text { Salary of Product Line Manager } & \$ 25,000 \\\hline \text { Fixed Manufacturing Overhead } & \$ 145,000 \\\hline \text { Operating Income (Loss) } & \$ \$ 55,000) \\\hline\end{array}$ Clemson Company is trying to determine whether to discontinue the manufacture and sale of Tams. The operating results reported above for last year are expected to continue in the foreseeable future if the product is not dropped. The fixed manufacturing overhead represents the costs of production facilities and equipment that the Tam product shares with other products produced by Clemson. If the Tam product were discontinued, there would be no change in the fixed manufacturing costs of the company.
-Assume that discontinuing the manufacture and sale of Tams will have no effect on the sale of other product lines.If the company discontinues the Tam product line,what will be the change in the annual operating income (loss) ?

• A) $55,000 decrease.
• B) $65,000 decrease.
• C) $70,000 increase.
• D) $90,000 decrease.

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Definitions:

Proletariat

The class of wage-earners in a capitalist society whose only significant material value is their labor power; a member of such a class is typically lacking in capital and property ownership.

Bourgeoisie

The social class that owns the means of production in a capitalist society, typically associated with wealth and material possessions.

Primary Market

The market where new securities are issued and sold for the first time, allowing corporations, governments, and other entities to raise capital directly from investors.

Secondary Market

A marketplace where investors buy and sell securities or assets from other investors, rather than from the issuing entities themselves.