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

question 108

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.
- Assume that $25,000 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 $25,000.
• B) Operating income will increase by $5,000.
• C) Operating income will decrease by $25,000.
• D) Operating income will decrease by $5,000.

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Definitions:

PLC Software

Computer programs specifically designed to create, simulate, and implement control algorithms for Programmable Logic Controllers.

Control Process

The method of regulating and managing variables within a system or environment to achieve a desired output or condition, often used in industrial, mechanical, and biological contexts.

Starter Coil

An electromagnetic coil used in starting systems of engines or motors to provide the initial torque or to engage the starting mechanism.

Pressure Switch

An apparatus that engages or disengages an electric circuit in response to reaching a specified fluid pressure at its input.