Cambridge Roller Skates Has Three Product Lines-D,E,and F

question 151

Multiple Choice

Cambridge Roller Skates has three product lines-D,E,and F.The following information is available:

The company is deciding whether to drop product line F because it has an operating loss.Assume that $21,000 of total fixed costs could be eliminated by dropping F.What effect would this decision have on operating income?

• A)Operating income will increase by $23,000.
• B)Operating income will increase by $1,000.
• C)Operating income will decrease by $23,000.
• D)Operating income will decrease by $1,000.

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Definitions:

FICA-OASDI

Represents the Federal Insurance Contributions Act's Old-Age, Survivors, and Disability Insurance, a U.S. payroll tax that funds Social Security.

FICA-Medicare

The portion of the Federal Insurance Contributions Act tax that is allocated to Medicare, funding hospital insurance benefits for individuals who are elderly or disabled.

Payroll Register

A document that records detailed information about the compensation paid to employees, including wages, deductions, and net pay.

W-2 Forms

Official tax documents that employers send to employees and the IRS, reporting the employee's annual wages and the amount of taxes withheld from their paycheck.