Iver Roller Skates Has Three Product Lines-D,E,and F The Company Is Deciding Whether to Drop Product Line F

question 85

Multiple Choice

Iver Roller Skates has three product lines-D,E,and F.The following information is available: $\begin{array}{|l|r|r|r|}\hline&\mathrm{D} & \mathrm{E} & \mathrm{F}\\\hline \text { Sales revenue } & \$ 90,000 & \$ 50,000 & \$ 30,000 \\\hline \text { Variable costs } & (40,000) & (10,000) & \$(11,000 \\\hline \text { Contribution margin } & \$ 50,000 & \$ 40,000 & \$ 19,000 \\\hline \text { Fixed costs } & (10,000) & \underline{(10,000} & \underline{(24,000} \\\hline \text { Operating income (loss) } & \$ 40,000 & \$ 30,000 & \$(5,000 \\\hline\end{array}$ The company is deciding whether to drop product line F because it has an operating loss.Assuming fixed costs are unavoidable,if Iver drops product line F and rents the space formerly used to produce product F for $19,000 per year,total income will be ________.

• A)$11,000
• B)$65,000
• C)$19,000
• D)$24,000

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Definitions:

Sum Of Squares

A statistical tool that quantifies the variance within a set of numbers, measuring the dispersion from their mean.

Error

A discrepancy between a computed or measured value and the true value.

Linear Regression

A statistical method used to model the relationship between a dependent variable and one or more independent variables by fitting a linear equation.

F-Test Statistic

A type of statistical test used to compare the variances of two populations or to test the significance of regression coefficients in a linear regression model.