Accelerate Rollerblades Has Three Product Lines-D, E, and F The Company Is Deciding Whether to Drop Product Line F

question 169

Multiple Choice

Accelerate Rollerblades has three product lines-D, E, and F. The following information is available: $$\begin{array} { | l | l | r | r | } \hline & \text { D } & \text { E } & \text { F } \\\hline \text { Sales revenue } & \$ 70,000 & \$ 40,000 & \$ 31,000 \\\hline \text { Variable costs } & ( 20,000 & ( 5000 ) & \underline { ( 11,000 ) } \\\hline \text { Contribution margin } & \$ 50,000 & \$ 35,000 & \$ 20,000 \\\hline \text { Fixed costs } & \underline { ( 10,000 } & \underline { ( 5000 ) } & \underline { ( 23,000 ) } \\\hline \text { Operating income (loss) } & \$ 40,000 & \$ 30,000 & \$ ( 3000 ) \\\hline\end{array}$$ The company is deciding whether to drop product line F because it has an operating loss. Assume that $15,000 of total fixed costs could be eliminated by dropping F. What effect would this decision have on operating income?

• A) Operating income will increase by $35,000.
• B) Operating income will increase by $20,000.
• C) Operating income will decrease by $5000.
• D) Operating income will decrease by $15,000.

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Definitions:

Diversity Competency

Diversity competency involves the ability to interact effectively with individuals from various cultures, backgrounds, and beliefs.

Associate Resource Groups

Employee-led groups formed within organizations that focus on shared characteristics or experiences, such as gender, ethnicity, or interests, aiming to foster a diverse and inclusive workplace.

Customers Insights Team

A group within an organization focused on analyzing customer data and feedback to drive business strategy and innovation.

Fault Lines

Hypothetical divisions within a group or team, based on demographic, cultural, or organizational differences, that can lead to conflict.