Camera Corner Is Considering Eliminating Model AE2 from Its Camera

question 193

Multiple Choice

Camera Corner is considering eliminating Model AE2 from its camera line because of losses over the past quarter. The past three months of information for Model AE2 are summarized below: Overhead costs are 70% variable and the remaining 30% is depreciation of special equipment for model AE2 that has no resale value.
If Model AE2 is dropped from the product line, operating income will:

• A)increase by $10,000
• B)decrease by $20,000
• C)increase by $30,000
• D)decrease by $10,000

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Definitions:

Reasonable Notice

The adequate time or warning given in advance of an event or action, such as termination of employment, required by law or contract.

Damages Payable

Monetary compensation that a party is legally obligated to pay as a result of causing harm or loss to another party.

Injunction

A court order requiring an individual or entity to do or to refrain from doing a specific act, used as a remedy in many types of disputes.

Minimum Wage

The lowest legal hourly pay that employers are allowed to pay workers, established to ensure a basic standard of living for employees.