The Tangier Company Is Considering Eliminating the Following Product Line

question 6

Multiple Choice

The Tangier Company is considering eliminating the following product line: What amount of cost is avoidable if Tangier outsources production of this product?
$\begin{array}{|l|c|}\hline &{\text { Product AXP }} \\\hline \text { Sales } & \$ 80,000 \\\hline{\text { Less variable costs: }} \\\hline \text { Raw materials } & 50,000 \\\hline \text { Direct labor } & 10,000 \\\hline \text { Contribution margin } & \$ 20,000 \\\hline{\text { Less fixed costs: }} \\\hline \text { Production costs allocated to products } & 30,000 \\\hline \text { Profit (Loss) } & \$ (10,000) \\\hline\end{array}$

• A)$60,000
• B)$50,000
• C)$90,000
• D)$20,000

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Definitions:

Product Variety

The assortment of different products or services offered by a firm or available in a market.

Monopolistic Competition

A market structure where many firms offer products or services that are similar but not perfect substitutes, leading to competition based on factors other than price.

Excess Capacity

A situation where a business has more production facilities, resources, or capability than currently needed to meet demand.

Nonprice Competition

Competitive strategies used by companies to attract customers through methods other than lowering prices, such as product quality, service, and marketing.