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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?

FINANCIAL ACCOUNTING
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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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?
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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