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

question 39

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 the Pitcher line at Pottery Unlimited is dropped, total fixed costs remain unchanged, and the space formerly used to produce the line is rented for $45,000 per year, how will operating income be affected?

• A) Decrease $15,000
• B) Increase $45,000
• C) Increase $44,000
• D) Increase $15,000

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Definitions:

Cost of Goods Sold

The immediate expenses related to manufacturing products sold by a business, encompassing both materials and labor.

Overapplied

Refers to the situation where the allocated manufacturing overhead cost is greater than the actual manufacturing overhead cost incurred.

Underapplied

A situation in which the allocated manufacturing overhead costs are less than the actual overhead costs incurred.

Raw Materials

Basic materials and components that are used in the manufacturing process to produce finished goods.