McCollum Company manufactures two products. Both products have the same sales price, and the volume of sales is equivalent. However, due to the difference in production processes, Product A has higher variable costs and Product B has higher fixed costs. Management is considering dropping Product B because that product line has an operating loss. (Click the icon to view the income statement.) 9. 10. If fixed costs cannot be avoided, should McCollum drop Product B? Why or why not? If 50% of Product B's fixed costs are avoidable, should McCollum drop Product B? Why or why not? 9. If fixed costs cannot be avoided, should McCollum drop Product B? Why or why not? (Use a minus sign or parentheses to enter a decrease in profits.) Expected decrease in revenue Expected decrease in total variable costs Expected increase/(decrease) in operating income McCollum drop Product B because operating income will 10. If 50% of Product B's fixed costs are avoidable, should McCollum drop Product B? Why or why not? (Use a minus sign or parentheses to enter a decrease in profits.) Expected decrease in revenue Expected decrease in total variable costs Expected decrease in fixed costs Expected decrease in total costs Expected increase/(decrease) in operating income McCollum drop Product B because operating income will Data table McCollum Company Income Statement Month Ended June 30, 2024 Total Net Sales Revenue Variable Costs Contribution Margin Fixed Costs Operating Income/(Loss) $ $ Print 150,000 $ 90,000 Product A 75,000 $ 55,000 60,000 50,000 10,000 $ Done 20,000 5,000 15,000 $ Product B 75,000 35,000 40,000 45,000 (5,000) - X
McCollum Company manufactures two products. Both products have the same sales price, and the volume of sales is equivalent. However, due to the difference in production processes, Product A has higher variable costs and Product B has higher fixed costs. Management is considering dropping Product B because that product line has an operating loss. (Click the icon to view the income statement.) 9. 10. If fixed costs cannot be avoided, should McCollum drop Product B? Why or why not? If 50% of Product B's fixed costs are avoidable, should McCollum drop Product B? Why or why not? 9. If fixed costs cannot be avoided, should McCollum drop Product B? Why or why not? (Use a minus sign or parentheses to enter a decrease in profits.) Expected decrease in revenue Expected decrease in total variable costs Expected increase/(decrease) in operating income McCollum drop Product B because operating income will 10. If 50% of Product B's fixed costs are avoidable, should McCollum drop Product B? Why or why not? (Use a minus sign or parentheses to enter a decrease in profits.) Expected decrease in revenue Expected decrease in total variable costs Expected decrease in fixed costs Expected decrease in total costs Expected increase/(decrease) in operating income McCollum drop Product B because operating income will Data table McCollum Company Income Statement Month Ended June 30, 2024 Total Net Sales Revenue Variable Costs Contribution Margin Fixed Costs Operating Income/(Loss) $ $ Print 150,000 $ 90,000 Product A 75,000 $ 55,000 60,000 50,000 10,000 $ Done 20,000 5,000 15,000 $ Product B 75,000 35,000 40,000 45,000 (5,000) - X
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:McCollum Company manufactures two products. Both products have the same sales price, and the volume of sales is equivalent. However, due to the difference in production processes, Product A has higher variable costs and Product B has higher fixed costs. Management is
considering dropping Product B because that product line has an operating loss.
(Click the icon to view the income statement.)
9.
10.
If fixed costs cannot be avoided, should McCollum drop Product B? Why or why not?
If 50% of Product B's fixed costs are avoidable, should McCollum drop Product B? Why or why not?
9. If fixed costs cannot be avoided, should McCollum drop Product B? Why or why not? (Use a minus sign or parentheses to enter a decrease in profits.)
Expected decrease in revenue
Expected decrease in total variable costs
Expected increase/(decrease) in operating income
McCollum
drop Product B because operating income will
10. If 50% of Product B's fixed costs are avoidable, should McCollum drop Product B? Why or why not? (Use a minus sign or parentheses to enter a decrease in profits.)
Expected decrease in revenue
Expected decrease in total variable costs
Expected decrease in fixed costs
Expected decrease in total costs
Expected increase/(decrease) in operating income
McCollum
C
drop Product B because operating income will
Data table
McCollum Company
Income Statement
Month Ended June 30, 2024
Total
Net Sales Revenue
Variable Costs
Contribution Margin
Fixed Costs
Operating Income/(Loss)
$
$
Print
150,000 $
90,000
60,000
50,000
10,000 $
Product A
75,000 $
55,000
Done
20,000
5,000
15,000 $
Product B
75,000
35,000
40,000
45,000
(5,000)
- X
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