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:

Tertiary Circular Reactions

A cognitive developmental stage in Piaget's theory, occurring around 12 to 18 months, where infants experiment with new activities and explore the outcomes.

Sensorimotor Period

The first stage in Jean Piaget's theory of cognitive development, occurring from birth to about age 2, where infants learn through sensory experiences and manipulating objects.

Decentering

A cognitive ability to consider multiple aspects of a situation or adopt another person's perspective, vital in developing empathy and solving problems effectively.

Preoperational

A developmental stage in Jean Piaget's theory, characterized by symbolic thought and egocentrism, typically from ages 2 to 7.