ABC Company has three product lines-D, E, and F. The following information is available: Sales revenue Variable costs D Operating income (loss) E F $90,000 $40,000 $31,000 (40,000) (15,000) (10,000) Contribution $50,000 $25,000 $21,000 margin Fixed costs (20,000) (15,000) (23,000) $30,000 $10,000 $(2000) The company is deciding whether to drop product line F because it has an operating loss. Assuming fixed costs are unavoidable, if ABC drops product line F, what effect will this have on operating income?

ABC Company has three product lines-D, E, and F. The following information is available: Sales revenue Variable costs D Operating income (loss) E F $90,000 $40,000 $31,000 (40,000) (15,000) (10,000) Contribution $50,000 $25,000 $21,000 margin Fixed costs (20,000) (15,000) (23,000) $30,000 $10,000 $(2000) The company is deciding whether to drop product line F because it has an operating loss. Assuming fixed costs are unavoidable, if ABC drops product line F, what effect will this have on operating income?

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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