Use the Information Below to Answer the Following Question(s)

question 193

Multiple Choice

Use the information below to answer the following question(s) :
Darren Company has three product lines: D, E, and F. The following information is available:

-Darren Company is thinking of dropping product line F because it is reporting an operating loss. All fixed expenses are unavoidable. Assuming Darren Company drops product line F and does not replace it, what affect will this have on operating income?

• A) Increase $16,000
• B) Decrease $16,000
• C) Increase $1,000
• D) Decrease $1,000

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Definitions:

Adam Smith

A Scottish economist and philosopher, considered the father of modern economics, best known for his work "The Wealth of Nations."

Efficient

The characteristic of maximizing output or effectiveness with the least waste of time, resources, or effort.

Opportunities

Chances or circumstances that allow for growth, development, or success in various areas such as business, personal life, or education.

Marginally Optimal

Describes an economic decision where the marginal benefit from the last unit of good or service consumed or produced is equal to its marginal cost.