The Draper Corporation is considering dropping its Doombug toy due to continuing losses. Data on the toy for the past year follow: Sales of 15,000 units Variable expenses Contribution margin $ 150,000 120,000 30,000 40,000 $ (10,000) Fixed expenses Net operating loss If the toy were discontinued, Draper could avoid $8,000 per year in fixed costs. The remainder of the fixed costs are not avoidable. Assuming all other conditions stay the same, at what level of annual sales of Doombugs (in units) should Draper be indifferent between discontinuing Doombugs or continuing the production and sale of Doombugs? 4,000 units 20,000 units 18,000 units 6,000 units

The Draper Corporation is considering dropping its Doombug toy due to continuing losses. Data on the toy for the past year follow: Sales of 15,000 units Variable expenses Contribution margin $ 150,000 120,000 30,000 40,000 $ (10,000) Fixed expenses Net operating loss If the toy were discontinued, Draper could avoid $8,000 per year in fixed costs. The remainder of the fixed costs are not avoidable. Assuming all other conditions stay the same, at what level of annual sales of Doombugs (in units) should Draper be indifferent between discontinuing Doombugs or continuing the production and sale of Doombugs? 4,000 units 20,000 units 18,000 units 6,000 units

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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