A Study Has Been Conducted to Determine If Product a Should

question 54

Multiple Choice

A study has been conducted to determine if Product A should be dropped. Sales of the product total $400,000 per year; variable expenses total $270,000 per year. Fixed expenses charged to the product total $160,000 per year. The company estimates that $70,000 of these fixed expenses are not avoidable even if the product is dropped. If Product A is dropped, the company's overall net operating income would:

• A)decrease by $40,000 per year
• B)increase by $40,000 per year
• C)decrease by $30,000 per year
• D)increase by $30,000 per year

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Definitions:

Solvency

The ability of an entity, whether an individual, company, or country, to meet its long-term financial commitments and debts.

Subatomic Particles

Particles that are smaller than atoms, including protons, neutrons, and electrons, which make up the atom's nucleus and electron cloud.

Electrons

Electrons are negatively charged subatomic particles that orbit the nucleus of an atom, playing a critical role in chemical reactions and electricity.

Orbitals

Regions within an atom where electrons are most likely to be found, describing the probable location of electrons around a nucleus.