Assuming Product C is discontinued and the space formerly used to produce Product C is rented for $12,000 per year, operating income will

ACCOUNTING

Multiple Choice

Denly Company has three products, A, B, and C. The following information is available:



Product A Product B Product C

Sales $60,000 $90,000 $24,000

Variable costs 36,000 48,000 15,000

Contribution margin 24,000 42,000 9,000

Fixed costs:

Avoidable 9,000 18,000 6,000

Unavoidable 6,000 9,000 5,400

Operating income $ 9,000 $15,000 $ (2,400)



Assuming Product C is discontinued and the space formerly used to produce Product C is rented for $12,000 per year, operating income will

a. increase by $6,600.

b. increase by $9,000.

c. increase by $12,000.

d. increase by $14,400.


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