Shine Bright Company Has Three Product Lines: D, E, and F

question 73

Multiple Choice

Shine Bright Company has three product lines: D, E, and F. The following information is available: Shine Bright Company is thinking of dropping product line F because it is reporting an operating loss. Assume that $15,000 of total fixed costs could be eliminated by dropping F. What effect would this decision have on operating income?

• A)Operating income will increase $3,000.
• B)Operating income will increase $1,000.
• C)Operating income will decrease $6,000.
• D)Operating income will decrease $3,000.

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Definitions:

Temporary Accounts

These include accounts that are closed at the end of each accounting period, including income, expense, and withdrawal accounts.

Carried Forward

The act of transferring a balance from one period to the next on financial statements or ledgers.

Owners' Equity

The total value belonging to the owners of a company, calculated as the company's total assets minus its total liabilities, indicative of the net worth.

Net Worth

The total value of an individual's or organization's assets minus liabilities, representing the financial health or value of the entity.