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A study has been conducted to determine if Product A should be dropped. Total sales of the product are $200,000 per year; total variable expenses are $140,000 per year. Total fixed expenses charged to the product are $90,000 per year. The company estimates that $40,000 of these fixed expenses will continue even if the product is dropped. These data indicate that if Product A is dropped, the company's overall operating income per year would change by how much? O a. An increase of $30,000. O b. An increase of $20,000. O c. A decrease of $10,000. Od. A decrease of $20,000.

A study has been conducted to determine if Product A should be dropped. Total sales of the product are $200,000 per year; total variable expenses are $140,000 per year. Total fixed expenses charged to the product are $90,000 per year. The company estimates that $40,000 of these fixed expenses will continue even if the product is dropped. These data indicate that if Product A is dropped, the company's overall operating income per year would change by how much? O a. An increase of $30,000. O b. An increase of $20,000. O c. A decrease of $10,000. Od. A decrease of $20,000.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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A study has been conducted to determine if Product A should be dropped. Total sales of the product are $200,000 per year; total variable expenses are $140,000 per year. Total fixed expenses charged to the product are $90,000 per year. The company estimates that $40,000 of these fixed expenses will continue even if the product is dropped. These data indicate that if Product A is dropped, the company's overall operating income per year would change by how much? O a. An increase of $30,000. O b. An increase of $20,000. Oc. A decrease of $10,000. Od. A decrease of $20,000.
Transcribed Image Text:A study has been conducted to determine if Product A should be dropped. Total sales of the product are $200,000 per year; total variable expenses are $140,000 per year. Total fixed expenses charged to the product are $90,000 per year. The company estimates that $40,000 of these fixed expenses will continue even if the product is dropped. These data indicate that if Product A is dropped, the company's overall operating income per year would change by how much? O a. An increase of $30,000. O b. An increase of $20,000. Oc. A decrease of $10,000. Od. A decrease of $20,000.
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