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

question 261

Multiple Choice

Use the information below to answer the following question(s) :
Darren Company has three product lines: D, E, and F. The following information is available:

-Darren Company is thinking of dropping product line F because it is reporting an operating loss. All fixed costs are unavoidable. Assume Darren Company is able to increase the revenues of product F to $30,000 with no change in volume of units sold and no change in variable costs or fixed costs. What affect will this have on operating income?

• A) Increase $2,000
• B) Increase $30,000
• C) Decrease $2,000
• D) Decrease $30,000

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Definitions:

Option's Value

The intrinsic and time value associated with an options contract, determining its worth on the market.

Option

A financial derivative that provides the buyer the right, but not the obligation, to buy or sell an asset at an agreed-upon price within a certain period.

Lower Bound

The minimum level that an economic or financial variable can achieve, often used in the context of interest rates.

Fixed Price

A fixed price is a set cost for goods or services that does not change in response to market fluctuations or differing quantities purchased.