Use the Information Below to Answer the Following Question(s)

question 60

Multiple Choice

Use the information below to answer the following question(s) :
Pottery Unlimited has two product lines: cups and pitchers. Income statement data for the most recent year follow:

-Assuming Pottery Unlimited's fixed costs remain unchanged, how would dropping the Pitcher line affect operating income?

• A) Decrease in total operating income of $30,000
• B) Increase in total operating income of $8,000
• C) Increase in total operating income of $22,000
• D) Decrease in total operating income of $1,000

---

Definitions:

Process Costing

An accounting methodology used for homogenous products that averages production costs over all units produced.

Conversion Costs

The sum of labor and overhead costs required to convert raw materials into finished goods.

Forming Department

A specific division within a manufacturing environment where materials undergo the initial stages of production.

Equivalent Unit

A measure used in cost accounting to represent a partial unit of production, allowing for the comparison and calculation of costs for partially completed goods.