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:

Globalization

The process by which businesses, technologies, or philosophies spread worldwide, leading to increased interconnectedness and interdependence among nations.

Local Culture

Refers to the practices, beliefs, and objects that are unique and meaningful to a specific community or group of people within a smaller geographical area.

Integration

The process of combining or coordinating separate elements into a unified whole, often referring to the social assimilation of individuals or groups.

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Refers to groups of people native to a specific region or country, often maintaining traditional customs and ways of life distinct from those of dominant cultures.