Castillo Corporation Has Provided You with the Following Budgeted Income

question 110

Multiple Choice

Castillo Corporation has provided you with the following budgeted income statement for one of its products: $$\begin{array} { | l | r | } \hline \text { Sales revenue } & \$ 700,000 \\\hline \text { Variable costs } & \underline { ( 430,000 ) } \\\hline \text { Contribution margin } & \$ 270,000 \\\hline \text { Fixed costs } & \underline { ( 310,000 } ) \\\hline \text { Operating loss } & \underline {\$ ( 40,000 ) } \\\hline\end{array}$$ Castillo has just encountered environmental problems with the product and will be forced to drop the product line altogether.Castillo will be able to eliminate 75% of the fixed costs.What will be the impact on operating income of the company?

• A)Operating income will decrease by $232,500.
• B)Operating income will decrease by $37,500.
• C)Operating income will increase by $232,500.
• D)Operating income will increase by $37,500.

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Definitions:

Psychopathology

The study of mental disorders, including their symptoms, causes, and treatments.

Personality Inventory

A questionnaire designed to reveal aspects of an individual's character or psychological makeup.

Minnesota Multiphasic Personality Inventory

The Minnesota Multiphasic Personality Inventory is a standardized psychometric test used to assess and diagnose mental disorders and personality structure.

Minnesota Multiphasic Personality Inventory

A standardized psychometric test of adult personality and psychopathology used to diagnose mental disorders.