The Cabinet Shoppe Is Considering the Addition of a New

question 24

Multiple Choice

The Cabinet Shoppe is considering the addition of a new line of kitchen cabinets to its current product lines. Expected cost and revenue data for the new cabinets are as follows: If the new cabinets are added, it is expected that the contribution margin of other product lines at the cabinet shop will drop by $20,000 per year.


-If the new cabinet product line is added next year,the increase in net operating income resulting from this decision would be:

• A)$80,000
• B)$225,000
• C)$125,000
• D)$105,000

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Definitions:

Distribution

The process of giving out products or goods to the final consumer or distributor.

Chapter 7 Liquidation

A bankruptcy process where a debtor's assets are sold off to pay creditors, leading to the closure of the business.

Insurance Company

A financial institution that provides various types of coverage to individuals and entities against potential future losses or damages.

Credit Union

A member-owned financial cooperative that provides traditional banking services.