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Problem 1: A firm is considering dropping the product line "ZZ". ZZ currently shows a loss of $100,000. The contribution margin for the product line is $120,000. Total fixed expenses are $220,000 of which 90,000 is unavoidable and $130,000 is avoidable. How much better off or worse off will the firm be if they keep product ZZ?
Option 1: Better off by keeping ZZ by $30,000Option 2: Better off by keeping ZZ by $120,000Option 3: Worse off by keeping ZZ by $10,000Option 4: Better off by keeping ZZ by $10,000
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