Tyler Corporation Has Provided You with the Following Budgeted Income

question 141

True/False

Tyler Corporation has provided you with the following budgeted income statement for one of their products:
$$\begin{array} { | l | r | } \hline \text { Sales } & \$ 750,000 \\\hline \text { Variable expenses } & \underline { 500,000 } \\\hline \text { Contribution margin } & \$ 250,000 \\\hline \text { Fixed expenses } & \underline { 280,000 } \\\hline \text { Operating income } & \underline { \$ 30,000 } \\\hline\end{array}$$ Tyler Corporation believes that 80% of the fixed costs would be avoidable if the product line was dropped. Based on the impact of company's operating income, Tyler should not drop the product line.

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Definitions:

Return On Investment

A financial metric used to evaluate the efficiency of an investment, calculated as the net profit divided by the initial cost of the investment.

Invested Assets

Assets, including both equity and debt investments, that are held by an entity for earning returns or dividends.

Income From Operations

The profit generated from a business's regular core business operations, excluding any investment and financing activities.

Locomotive Division

A specialized business unit within a company that focuses on the design, manufacture, or maintenance of locomotives and related equipment.