A Study Has Been Conducted to Determine If Product a Should

question 62

Multiple Choice

A study has been conducted to determine if Product A should be dropped.Total sales of the product are $200,000 per year;total variable expenses are $140,000 per year.Total fixed expenses charged to the product are $90,000 per year.The company estimates that $40,000 of these fixed expenses will continue even if the product is dropped.These data indicate that if Product A is dropped,the company's overall operating income per year would change by how much?

• A) A decrease of $10,000.
• B) An increase of $20,000.
• C) A decrease of $20,000.
• D) An increase of $30,000.Add avoidable costs (90,000 - 40,000)= $50,000.Operating Income decreased by $10,000.

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Definitions:

Performance Objectives

Specific, measurable goals set to evaluate the effectiveness and outcomes of activities within an organization.

Systematic Way

An organized, methodical approach to solving problems or completing tasks.

Participatory Planning

A process that involves all stakeholders, including employees, in the planning process to ensure their ideas and needs are considered.

Scarce Resources

Limited availability of resources that are necessary for humans or an organization to meet its needs or to achieve its goals.