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

question 85

Multiple Choice

Macaulay Company has three product lines-D,E,and F.The following information is available:
$$\begin{array} { | l | c | l | l | } \hline & \text { D } & { \text { E } } & { \text { F } } \\\hline \text { Sales } & \$ 90,000 & \$ 50,000 & \$ 30,000 \\\hline \text { Variable costs } & ( 40,000 ) & ( 10,000 ) & ( 10,000 ) \\\hline \text { Contribution margin } & \$ 50,000 & \$ 40,000 & 20,000 \\\hline \text { Fixed expenses } & (15,000 ) & ( 10,000 ) & ( 24,000 ) \\\hline \text { Operating profit (loss) } & \$ 35,000 & \$ 30,000 & (\$ 4000 ) \\\hline\end{array}$$
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 rents the space formerly used to produce product F for $20,000 per year,total profit will be:

• A) $20,000
• B) $24,000
• C) $10,000
• D) $61,000

---

Definitions:

Recessions

A period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.

Automatic Stabilizers

Economic policies and programs designed to offset fluctuations in a nation's economic activity without the need for intervention by policymakers.

Expenditures

The amount of money spent on goods, services, or other expenses within a certain period.

Recessions

Periods of temporary economic decline during which trade and industrial activities are reduced, generally identified by a fall in GDP in two successive quarters.