Accelerate Rollerblades Has Three Product Lines-D,E,and F The Company Is Deciding Whether to Drop Product Line F

question 190

Multiple Choice

Accelerate Rollerblades has three product lines-D,E,and F.The following information is available: $$\begin{array} { | l | l | r | c | } \hline & \text { D } & \text { E } & \text { F } \\\hline \text { Sales revenue } & \$ 90,000 & \$ 60,000 & \$ 31,000 \\\hline \text { Variable costs } & ( 20,000 ) & ( 15,000 ) & ( 11,000 ) \\\hline \text { Contribution margin } & \$ 70,000 & \$ 45,000 & \$ 20,000 \\\hline \text { Fixed costs } & ( 20,000 ) & ( 5000 ) & ( 24,000 ) \\\hline \text { Operating income (loss) } & \$ 50,000 & \$ 40,000 & \$ ( 4000 ) \\\hline\end{array}$$ The company is deciding whether to drop product line F because it has an operating loss.Assume that $15,000 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 $35,000.
• B) Operating income will increase by $20,000.
• C) Operating income will decrease by $5000.
• D) Operating income will decrease by $15,000.

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Definitions:

Concrete Operational Stage

A developmental phase in children, identified by Jean Piaget, typically occurring between ages 7 and 12, where children begin to think logically about concrete events.

Cognitive Development

Cognitive development is the process by which individuals acquire and evolve in their thinking abilities, from infancy through adulthood, encompassing reasoning, memory, problem-solving, and decision-making skills.

Equal Amounts

Refers to a situation where two or more entities possess the same quantity or measure of something.

Conservation

In cognitive development, conservation is the understanding that certain properties of objects remain the same despite changes in their form or appearance.