Darren Company Has Three Product Lines: D,E,and F the Following

question 63

Multiple Choice

Darren Company has three product lines: D,E,and F The following information is
available:
$\begin{array} { | l | c c | c |} \hline & \text { D } & \text { E } & \text { F } \\\hline \text { Sales revenue } & \$ 70,000 & \$ 40,000 & \$ 28,000 \\\hline \text { Variable expenses } & \$ 40,000 & \$ 21,000 & \$ 12,000 \\\hline \text { Contribution margin } & \$ 30,000 & \$ 19,000 & \$ 16,000 \\\hline \text { Fixed expenses } & \$ 12,000 & \$ 15,000 & \$ 17,000 \\\hline \text { Operating income (loss) } & \$ 18,000 & \$ 4,000 & \$ ( 1,000 ) \\\hline\end{array}$
Darren Company is thinking of dropping product line F because it is reporting an operating loss.
- All fixed costs are unavoidable.Darren Company drops product line F and rents the space formerly used to produce product F for $17,000 per year,what affect will this have on operating income?

• A)Increase $1,000
• B)Increase $18,000
• C)Decrease $1,000
• D)Decrease $18,000

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Definitions:

Situation Analysis

Second step in a marketing plan; uses a SWOT analysis that assesses both the internal environment with regard to its Strengths and Weaknesses and the external environment in terms of its Opportunities and Threats.

Marketing Planning Process

A methodical approach to planning marketing strategies and tactics, involving situational analysis, setting goals, defining strategies, budgeting, and monitoring.

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CDSTEP Factors

An acronym standing for Cultural, Demographic, Social, Technological, Economic, and Political factors that influence a company's external marketing environment.