The Management of Cackowski Corporation Has Been Concerned for Some

question 122

Multiple Choice

The management of Cackowski Corporation has been concerned for some time with the financial performance of its product I11S and has considered discontinuing it on several occasions.Data from the company's accounting system appear below: In the company's accounting system all fixed expenses of the company are fully allocated to products.Further investigation has revealed that $185, 000 of the fixed manufacturing expenses and $132, 000 of the fixed selling and administrative expenses are avoidable if product I11S is discontinued. What would be the effect on the company's overall net operating income if product I11S were dropped?

• A)Overall net operating income would decrease by $46, 000.
• B)Overall net operating income would increase by $93, 000.
• C)Overall net operating income would increase by $46, 000.
• D)Overall net operating income would decrease by $93, 000.

---

Definitions:

Bean Sprouts

Young shoots of various bean plants, such as the mung bean, consumed as a vegetable.

Firm's Production

The total amount of goods and services produced by a business within a specific period, influenced by factors such as labor, capital, and technology.

Demand Curve

A visual representation detailing how consumer demand for a product changes in relation to its price.

Cost Function

A cost function describes the cost of producing a certain number of goods or services, taking into account factors like labor and materials.