Ram Co. is trying to decide whether or not to discontinue one of its products, slow cookers. Last year's sales and expenses for slow cookers are as follows: Sales $65,000 Less expenses: Variable costs $35,000 Fixed costs 48,000 83,000 Net operating loss $(18,000) If slow cookers are discontinued, 75% of the fixed costs can be avoided. At the same time, discontinuing slow cookers will have no effect on other products. What is the financial advantage or disadvantage of discontinuing slow cookers? Multiple Choice a)$17,000 financial advantage b)$13,000 financial disadvantage c)$4,000 financial disadvantage d)$6,000 financial advantage
Ram Co. is trying to decide whether or not to discontinue one of its products, slow cookers. Last year's sales and expenses for slow cookers are as follows: Sales $65,000 Less expenses: Variable costs $35,000 Fixed costs 48,000 83,000 Net operating loss $(18,000) If slow cookers are discontinued, 75% of the fixed costs can be avoided. At the same time, discontinuing slow cookers will have no effect on other products. What is the financial advantage or disadvantage of discontinuing slow cookers? Multiple Choice a)$17,000 financial advantage b)$13,000 financial disadvantage c)$4,000 financial disadvantage d)$6,000 financial advantage
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Ram Co. is trying to decide whether or not to discontinue one of its products, slow cookers. Last year's sales and expenses for slow cookers are as follows:
|
Sales |
|
$65,000 |
|
Less expenses: |
|
|
|
Variable costs |
$35,000 |
|
|
Fixed costs |
48,000 |
83,000 |
|
Net operating loss |
|
$(18,000) |
If slow cookers are discontinued, 75% of the fixed costs can be avoided. At the same time, discontinuing slow cookers will have no effect on other products. What is the financial advantage or disadvantage of discontinuing slow cookers?
Multiple Choice
a)$17,000 financial advantage
b)$13,000 financial disadvantage
c)$4,000 financial disadvantage
d)$6,000 financial advantage
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