The Management of Kabanuck Corporation Is Considering Dropping Product V41B

question 82

Multiple Choice

The management of Kabanuck Corporation is considering dropping product V41B.Data from the company's accounting system appear below: All fixed expenses of the company are fully allocated to products in the company's accounting system.Further investigation has revealed that $184, 000 of the fixed manufacturing expenses and $200, 000 of the fixed selling and administrative expenses are avoidable if product V41B is discontinued. According to the company's accounting system, what is the net operating income earned by product V41B? Include all costs in this calculation-whether relevant or not.

• A)$71, 000
• B)$516, 000
• C)$(516, 000)
• D)$(71, 000)

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Definitions:

Break-Even Interest Rate

The interest rate at which an investment generates returns that are sufficient to cover the costs associated with the investment, resulting in a net profit of zero.

Zero-Coupon Bond

A bond that does not pay interest during its life but is sold at a discount and pays its full face value at maturity.

Forward Rate

An interest rate applicable to a financial transaction that will take place in the future.

Yield To Maturity

The total return anticipated on a bond if held until it matures, considering all interest payments and the capital gain or loss.