Accessibility Products Company Has Three Models: D,E,and F -
Accessibility Products Company Is Thinking of Dropping Model F

question 78

Multiple Choice

Accessibility Products Company has three models: D,E,and F.The following information is available:
$\begin{array} { | l | r | r | r | } \hline & { \text { Model D } } &{ \text { Model E } } & { \text { Model F } } \\\hline \text { Sales revenue } & \$ 55,000 & \$ 35,000 & \$ 29,000 \\\hline \text { Variable expenses } & \$ 32,000 & \$ 13,000 & \$ 14,000 \\\hline \text { Contribution margin } & \$ 23,000 & \$ 22,000 & \$ 15,000 \\\hline \text { Fixed expenses } & \$ 16,000 & \$ 16,000 & \$ 16,000 \\\hline \text { Operating income (loss) } & \$ 7,000 & \$ 6,000 & \$ ( 1,000 ) \\\hline\end{array}$
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Accessibility Products Company is thinking of dropping model F because it is reporting an operating loss.All fixed expenses are unavoidable.Assuming Accessibility Products Company drops model F and does not replace it,what affect will this have on operating income?

• A)Decrease $1,000
• B)Increase $1,000
• C)Increase $15,000
• D)Decrease $15,000

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Definitions:

Inflation

The speed at which prices for goods and services generally ascend, wearing away the power to purchase.

Base Year

A specific year against which economic growth is measured, serving as a standard or benchmark.

Nominal GDP

The market value of all final goods and services produced within a country in a year, measured using current prices.

Real GDP

The value of all goods and services produced within a country adjusted for inflation or deflation.