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:

Activities

Tasks or actions that are part of a project or process.

Estimations

Approximations or educated guesses about a project's timescales, costs, and resources, based on available data and experience.

Activity Durations

The total time taken from the start to the finish of an activity.

Estimate

An estimated assessment or determination of the worth, amount, size, or scope of something.