Motion Rollerblades Has Three Product Lines-D,E,and F

question 6

Multiple Choice

Motion Rollerblades has three product lines-D,E,and F.The following information is available:

The company is deciding whether to drop product line F because it has an operating loss.Assuming fixed costs are unavoidable,if Motion drops product line F and does not replace it,what effect will this have on operating income?

• A)Operating income will increase $2000.
• B)Operating income will increase $21,000.
• C)Operating income will increase $23,000.
• D)Operating income will decrease $21,000.

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Definitions:

Direct Labor-Hours

A measure of the total hours worked by employees directly involved in the production process, used for costing and efficiency analysis.

Manufacturing Overhead

All indirect costs associated with manufacturing, excluding direct materials and direct labor, such as utilities, depreciation, and maintenance of factory equipment.

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to products or services.

Manufacturing Cost

All expenses directly related to the production of goods, including raw materials, labor, and factory overhead.