Bally Company Has Three Product Lines: A,B and C Assume Bally Company Drops Product C

question 133

Multiple Choice

Bally Company has three product lines: A,B and C.The following annual information is available:
$\begin{array}{llll}&\text { Product A }&\text { Product B }&\text { Product C }\\\text { Sales } & \$ 60,000 & \$ 90,000 & \$ 24,000 \\\text { Variable costs } & \underline{36,000} & \underline{48,000} & 20,000\\\text { Contribution margin } & 24,000 & 42,000 & 4,000 \\\text { Avoidable fixed costs } & 9,000 & 18,000 & 3,000 \\\text { Unavoidable fixed costs } & 6,000 & 9,000 & 2,400\\\text { Operating income(loss) }&\$9,000&\$15,000&\$(1,400) \end{array}$
Assume Bally Company drops Product C.What will happen to operating income?

• A) increase by $1,400
• B) increase by $3,800
• C) decrease by $1,000
• D) decrease $1,400

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Definitions:

Total Revenue

The total amount of income generated by the sale of goods or services related to the company's primary operations before any expenses are deducted.

Investment In Receivables

The funds tied up in the credit sales of a company, indicating the amount of money owed by customers for goods or services delivered on credit.

Credit Sales

Sales in which the customer is allowed to purchase goods or services with an agreement to pay at a later date.

Average Collection Period

The mean duration required for a company to collect payments due from its clients.