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

question 261

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 costs are unavoidable. Assume Darren Company is able to increase the revenues of product F to $30,000 with no change in volume of units sold and no change in variable costs or fixed costs. What affect will this have on operating income?

• A) Increase $2,000
• B) Increase $30,000
• C) Decrease $2,000
• D) Decrease $30,000

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Definitions:

Accounts Receivable

Money that a business is due to receive from its customers for products or services already supplied but not paid for.

Salaries Expense

The overall cost incurred by a company to pay its employees, typically recorded as an operational expense.

Service Revenue

Income earned by a company through the provision of services to customers.

Owner's Capital

The amount of equity a business owner has invested in the firm or the net worth attributable to them, reflecting their financial stake.