Percy Productions Has Three Models: D, E, and F

question 126

Multiple Choice

Percy Productions has three models: D, E, and F. The following information is available: Percy Productions is thinking of discontinuing model F because it is reporting an operating loss. All fixed costs are unavoidable. Percy Productions discontinues model F and rents the space formerly used to produce product F for $18,000 per year, what effect will this have on operating income?

• A)Increase $19,000
• B)Increase $8000
• C)Decrease $19,000
• D)Decrease $8000

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Definitions:

Monthly Payment

A specific amount of money that is paid every month, commonly associated with loans or leases.

Effective Rate of Return

The actual annual interest earned or paid on an investment or loan, considering the effect of compounding.

RRSP

Registered Retirement Savings Plan, a Canadian financial retirement savings tool for individuals to hold investment assets and savings tax-deferred until withdrawal.

Contributions

Payments or services provided to a common fund or collection.