A Study Has Been Conducted to Determine If Product a Should

question 17

Multiple Choice

A study has been conducted to determine if Product A should be dropped.Sales of the product total $200,000 per year;variable expenses total $140,000 per year.Fixed expenses charged to the product total $90,000 per year.The company estimates that $40,000 of these fixed expenses will continue even if the product is dropped.These data indicate that if Product A is dropped,the company's overall net operating income would:

• A)decrease by $20,000 per year
• B)increase by $20,000 per year
• C)decrease by $10,000 per year
• D)increase by $30,000 per year

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Definitions:

Demand Curve

A graph showing the relationship between the price of a good and the quantity of that good consumers are willing to buy.

Substitute

a product or service that can be used in place of another to satisfy similar needs or desires.

Complement

Goods or services that, when used together, enhance each other's value to the consumer.

Income Increase

A rise in the amount of money received, especially on a regular basis, through work, investments, or business.