The Following Information Pertains to Erickson Company's Three Products: Assume

question 18

Multiple Choice

The following information pertains to Erickson Company's three products: Assume that product C is discontinued and the extra space is rented for $300 per month.All other information remains the same as the original data.What would be the effect on annual profits?
$\begin{array}{lrrr}&A&B&C\\\text { Unit sales per year } & \underline{250} & \underline{400} & \underline{250} \\\text { Selling price per unit } & \$ 9.00 & \$ 12.00 & \$ 9.00 \\\text { Variable costs per unit } & \underline{3.60} & \underline{9.00} & 9.90 \\\text { Unit contribution margin } & \$ 5.40 & \$ 3.00 & \$(0.90) \\\text { Contribution margin ratio } & 60 \% & 25 \% & (10) \%\end{array}$

• A)Annual profits would decrease by $75.
• B)Annual profits would remain the same.
• C)Annual profits would increase by $75.
• D)Annual profits would increase by $525.

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