Reference no: EM133062024
Question - Carlton Products has three product lines: A, B, and C.
|
|
A
|
B
|
C
|
Total
|
|
Sales
|
$500,000
|
$550,000
|
$700,000
|
$1,750,000
|
|
Variable costs
|
280,000
|
420,000
|
300,000
|
1,000,000
|
|
Contribution margin
|
220,000
|
130,000
|
400,000
|
750,000
|
|
Fixed costs
|
100,000
|
140,000
|
150,000
|
390,000
|
|
Net income
|
$120,000
|
$(10,000)
|
$250,000
|
$360,000
|
1. Management is considering dropping product line B. If it is discontinued, all of its fixed costs are AVOIDABLE. The discontinuation of product line B would:
a. decrease net income $10,000.
b. increase net income $130,000.
c. decrease net income $130,000.
d. increase net income $10,000.
2. Management is considering dropping product line B. If it is discontinued, all of its fixed costs are UNAVOIDABLE. The discontinuation of product line B would:
a. decrease net income $10,000.
b. increase net income $130,000.
c. decrease net income $130,000.
d. increase net income $10,000.
3. Management is considering dropping product line B. If it is discontinued, (1) $100,000 of its fixed costs are DTFC and (2) sales of product line C are increased by 60%. The discontinuation of product line B would:
a. decrease net income $6,000.
b. increase net income $106,000.
c. decrease net income $106,000.
d. increase net income $6,000.
4. Management is considering dropping product line B. If it is discontinued, (1) $100,000 of its fixed costs are COMMON FC and (2) the selling price of product line A is increased by 10%. The discontinuation of product line B would:
a. decrease net income $90,000.
b. increase net income $40,000.
c. decrease net income $40,000.
d. increase net income $90,000.
5. A factor to consider regarding a special order is the
a. variable costs associated with the special order
b. avoidable fixed costs associated with the special order
c. effect the sale of special-order units will have on the sale of regularly priced units
d. incremental revenue from the special order
e. All of the above