Macaulay Company Has Three Product Lines-D,E and F Macaulay Company Is Thinking of Dropping Product Line F Because

question 89

Multiple Choice

Macaulay Company has three product lines-D,E and F.The following information is available:
$$\begin{array} { | l | l | l | l | } \hline & { \text { D } } & { \text { E } } & { \text { F } } \\\hline \text { Sales } & \$ 70,000 & \$ 60,000 & \$ 30,000 \\\hline \text { Variable costs } & ( 30,000 ) & ( 10,000 ) & ( 12,000 ) \\\hline \text { Contribution margin } & \$ 40,000 & \$ 50,000 & 18,000 \\\hline \text { Fixed expenses } &( 20,000 ) & ( 10,000 ) & ( 23,000 ) \\\hline \text { Operating income (loss) } & \$ 20,000 & \$ 40,000 & (\$ 5000 ) \\\hline\end{array}$$
Macaulay Company is thinking of dropping product line F because it is reporting an operating loss.Assuming fixed costs are unavoidable,if Macaulay Company drops product line F and does not replace it,what effect will this have on operating profit?

• A) Operating profit will increase by $5000.
• B) Operating profit will decrease by $18,000.
• C) Operating profit will increase by $23,000.
• D) Operating profit will increase by $18,000.

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Definitions:

Text Color

The hue or shade of the font used in written content, which can affect readability and visual appeal.

Functional Artwork

Art that serves a practical function in addition to its aesthetic value, such as a beautifully designed piece of furniture.

Decorative Artwork

Art that is primarily concerned with the design and decoration of objects, often functional, to make them aesthetically pleasing.

Information Support

The provision of relevant data or resources to assist in decision-making or problem-solving.