Macaulay Company Has Three Product Lines-D, E, and F Macaulay Company Is Thinking of Dropping Product Line F Because

question 32

Multiple Choice

Macaulay Company has three product lines-D, E, and F. The following information is available: $\begin{array}{|l|c|c|c|} \hline& \text { D } & \text { E } & \text { F } \\\hline \text { Sales } & \$ 70,000 & \$ 40,000 & \$ 30,000 \\\hline \text { Variable costs } & (40,000) & (20,000) & (10,000) \\\hline \text { Contribution margin } & 30,000 & 20,000 & 20,000 \\\hline \text { Fixed expenses } & (15,000) & (15,000) & (25,000) \\\hline \text { Operating income (loss) } & \$ 15,000 & \$ 5,000 & (\$ 5,000) \\\hline\end{array}$ Macaulay Company is thinking of dropping product line F because it is reporting an operating loss.
- Assuming fixed costs are unavoidable, if Macaulay Company drops product line F, and rents the space formerly used to produce product F for $17,000 per year, total income will be:

• A) $10,000.
• B) $12,000.
• C) $20,000.
• D) $25,000.

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Definitions:

Canadian Shield

A vast area of mostly crystalline rocks exposed in the eastern half of Canada and the Great Lakes region of the United States.

Precambrian

The era in Earth's history before the Cambrian Period, representing the time from the planet's formation to 541 million years ago.

Tectonic Terranes

Distinct portions of the Earth's crust, often with a unique geological history, that have been attached to a tectonic plate through the process of accretion.

Accretion

The process of gradual growth or increase, particularly through the accumulation of additional layers or matter, especially in a cosmic or geological context.