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

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Definitions:

Premium on Bonds Payable

Premium on Bonds Payable refers to the amount by which the bond's selling price exceeds its face value or par value.

Interest Expense

The cost incurred by an entity for borrowed funds over a period, represented as an expense on the income statement.

Bonds Before Maturity

The buying or selling of bonds in the financial markets before they have reached their specified maturity date.

Extraordinary Item

A term used in accounting to describe events and transactions that are both unusual and infrequent in nature, significantly affecting a company's financial position.