Question: Donnelly Company has three products, R2, R4, and R2D2. The following information is available: Product R2 Product R4 Product R2D2 Sales $30,000 $45,000 $12,000 Variable Costs 18,000 24,000 7,500 Contribution Margin 12,000 21,000 4,500 Fixed Costs: Avoidable 4,500 9,000 3,000 Unavoidable 3,000 4,500 2,700 Operating Income $4,500 $7,500 $(1,200) Donnelly Company is thinking of dropping Product R2D2 because it is reporting a loss. Assuming Donnelly drops Product R2D2 and does not replace it, what will happen to operating income?
Question: Donnelly Company has three products, R2, R4, and R2D2. The following information is available: Product R2 Product R4 Product R2D2 Sales $30,000 $45,000 $12,000 Variable Costs 18,000 24,000 7,500 Contribution Margin 12,000 21,000 4,500 Fixed Costs: Avoidable 4,500 9,000 3,000 Unavoidable 3,000 4,500 2,700 Operating Income $4,500 $7,500 $(1,200) Donnelly Company is thinking of dropping Product R2D2 because it is reporting a loss. Assuming Donnelly drops Product R2D2 and does not replace it, what will happen to operating income?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Question:
Donnelly Company has three products, R2, R4, and R2D2. The following information is available:
Product R2 Product R4 Product R2D2
Sales
$30,000
$45,000
$12,000
Variable Costs
18,000
24,000
7,500
Contribution Margin 12,000
21,000
4,500
Fixed Costs:
Avoidable
4,500
9,000
3,000
Unavoidable
3,000
4,500
2,700
Operating Income
$4,500
$7,500
$(1,200)
Donnelly Company is thinking of dropping Product R2D2 because it is reporting a loss. Assuming Donnelly drops Product R2D2 and does
not replace it, what will happen to operating income?
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