DM Corporation Has Provided You with the Following Budgeted Income

question 130

Multiple Choice

DM Corporation has provided you with the following budgeted income statement for one of their products: $$\begin{array} { | l | r | } \hline \text { Sales } & \$ 700,000 \\\hline \text { Variable expenses } & ( 430,000 ) \\\hline \text { Contribution margin } & \$ 270,000 \\\hline \text { Fixed expenses } & \underline { ( 300,000 ) } \\\hline \text { Operating loss } & \underline { ( \$ 30,000 } ) \\\hline\end{array}$$ DM has just encountered environmental problems with the product and will be forced to drop the product line altogether. They will be able to eliminate 75% of the fixed expenses. What will be the impact on operating income of the company?

• A) Operating income will decrease by $195,000.
• B) Operating income will decrease by $45,000.
• C) Operating income will increase by $240,000.
• D) Operating income will increase by $55,000.

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Definitions:

Hostile Behavior

Actions or attitudes that are aggressive, unfriendly, or antagonistic towards others.

Blasting Intense Noise

The act of emitting extremely loud and potentially damaging sound, often used as a form of crowd control or psychological manipulation.

Mere Exposure Effect

The psychological phenomenon by which people tend to develop a preference for things merely because they are familiar with them.

Unfamiliar Stimulus

A new or unknown stimulus that has not been previously encountered by an individual, often triggering a learning or adaptation process.