Rambo Company Has Three Products,A,B,and C Rambo Company Is Thinking of Dropping Product C Because It

question 56

Multiple Choice

Rambo Company has three products,A,B,and C.The following information is available: $\begin{array}{lrrr}&\text { Product A }&\text { Product B }&\text { Product C }\\\text { Sales } & \$ 60,000 & \$ 90,000 & \$ 24,000 \\\text { Variable costs } & 36,000 & 48,000 & 15,000 \\\text { Contribution margin } & 24,000 & 42,000 & 9,000 \\\text { Fixed costs: } & & &\\\text { Avoidable } & 6,000 & 15,000 & 4,000 \\\text { Unavoidable } & 7,000 & 9,000 & 5,400 \\\text { Operating income } & \$ 11,000 & \$ 18,000 & \$(400) \end{array}$ Rambo Company is thinking of dropping Product C because it is reporting a loss.Assuming Rambo drops Product C and does NOT replace it,operating income will ________.

• A) increase by $400
• B) increase by $4,000
• C) decrease by $5,000
• D) decrease by $9,400

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Definitions:

Demographic Transition

A model that describes the transformation of a country from high birth and death rates to low birth and death rates as a society progresses economically.

Population Growth

The increase in the number of individuals in a population, often measured by birth rate minus death rate plus migration.

Economic Development

Economic Development refers to the process by which a region improves the well-being of its citizens through economic growth, redistribution of wealth, and improvements in quality of life.