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

question 107

Multiple Choice

Macaulay Company has three product lines-D,E,and F.The following information is available:
$$\begin{array} { | l | l | l | l | } \hline & \text { D } & { \text { E } } & { \text { F } } \\\hline \text { Sales } & \$ 90,000 & \$ 40,000 & \$ 30,000 \\\hline \text { Variable costs } & ( 30,000 ) & ( 10,000 ) & ( 11,000 ) \\\hline \text { Contribution margin } & \$ 60,000 & \$ 30,000 & 19,000 \\\hline \text { Fixed expenses } &( 10,000 ) & ( 15,000 ) & ( 25,000 ) \\\hline \text { Operating profit (loss) } & \$ 50,000 & \$ 15,000 &( \$ 6000 ) \\\hline\end{array}$$
Macaulay Company is thinking of dropping product line F because it is reporting 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 profit?

• A) Operating profit will increase by $19,000.
• B) Operating profit will decrease by $15,000.
• C) Operating profit will increase by $34,000.
• D) Operating profit will decrease by $4000.

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Definitions:

John Dewey

An American philosopher, psychologist, and educational reformer whose ideas have been influential in education and social reform.

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