Denly Company is thinking of dropping Product C because it is reporting a loss

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)



Denly Company is thinking of dropping Product C because it is reporting a loss. Assuming Denly drops Product C and does not replace it, operating income will

a. increase by $2,400.

b. increase by $3,000.

c. decrease by $3,000.

d. decrease by $5,400.


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