Income statements for the most recent period for each product line are presented below: Product A Product B Product C Total $1,200 $1,000 $1,100 $3,300 -400 -1.140 -2,020 =$720 =$600 = -$40 = $1,280 -140 -550 -130 -820 -Direct fixed costs -30 -100 -70 -200 = Net Operating income = $550 =-$50 = -$240 =$260 Which of the following statements is true about the effect of dropping a division? Sales -Variable costs =Contribution margin -Common fixed costs -480 O Dropping Product C will increase net operating income by $40 4 Dropping Product A will decrease net operating income by $550 O Dropping Product B will increase net operating income by $50 Dropping Product B will decrease net operating income by $500
Income statements for the most recent period for each product line are presented below: Product A Product B Product C Total $1,200 $1,000 $1,100 $3,300 -400 -1.140 -2,020 =$720 =$600 = -$40 = $1,280 -140 -550 -130 -820 -Direct fixed costs -30 -100 -70 -200 = Net Operating income = $550 =-$50 = -$240 =$260 Which of the following statements is true about the effect of dropping a division? Sales -Variable costs =Contribution margin -Common fixed costs -480 O Dropping Product C will increase net operating income by $40 4 Dropping Product A will decrease net operating income by $550 O Dropping Product B will increase net operating income by $50 Dropping Product B will decrease net operating income by $500
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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
Transcribed Image Text:Income statements for the most recent period for each product line are presented below:
Product A
Product B
Product C Total
$1,200
$1,000
$3,300
-480
-400
-2,020
= $720
= $600
= $1,280
-550
-820
-200
=$260
Sales
-Variable costs
=Contribution margin
-Common fixed costs
-140
-100
=-$50
$1,100
O Dropping Product C will increase net operating income by $40
4
O Dropping Product A will decrease net operating income by $550
O Dropping Product B will increase net operating income by $50
O Dropping Product B will decrease net operating income by $500
-1.140
= -$40
-130
-70
= -$240
-Direct fixed costs
-30
= Net Operating income = $550
Which of the following statements is true about the effect of dropping a division?
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