Camera Corner is considering eliminating Model AE2 from its camera line because of losses over the past quarter.The past three months of information for Model AE2 are summarised below:
$$\begin{array} { l r }
\text { Sales (1000 units) } & \$ 300000 \
\text { Manufacturing costs: } & \
\text { Direct materials } & 150000 \
\text { Direct labour ( } \$ 15 \text { per hour) } & 60000 \
\quad \text { Overhead } & 100000 \
\text { Operating loss } & \$ 10000 )
\end{array}$$
Overhead costs are 70% variable and the remaining 30% is depreciation of special equipment for model AE2 that has no resale value.
If Model AE2 is dropped from the product line,operating profit will:
A)increase by $30 000.
B)decrease by $20 000.
C)decrease by $10 000.
D)increase by $10 000.

Question

Camera Corner is considering eliminating Model AE2 from its camera line because of losses over the past quarter.The past three months of information for Model AE2 are summarised below:
$$\begin{array} { l r } 
\text { Sales (1000 units) } & \$ 300000 \
\text { Manufacturing costs: } & \
\text { Direct materials } & 150000 \
\text { Direct labour ( } \$ 15 \text { per hour) } & 60000 \
\quad \text { Overhead } & 100000 \
\text { Operating loss } & \$ 10000 )
\end{array}$$
Overhead costs are 70% variable and the remaining 30% is depreciation of special equipment for model AE2 that has no resale value.
If Model AE2 is dropped from the product line,operating profit will:
A)increase by $30 000.
B)decrease by $20 000.
C)decrease by $10 000.
D)increase by $10 000.

Quizplus · Accepted Answer

The Answer of Camera Corner is considering eliminating Model AE2 from its camera line because of losses over the past quarter.The past three months of information for Model AE2 are summarised below:
$$\begin{array} { l r } 
\text { Sales (1000 units) } & \$ 300000 \
\text { Manufacturing costs: } & \
\text { Direct materials } & 150000 \
\text { Direct labour ( } \$ 15 \text { per hour) } & 60000 \
\quad \text { Overhead } & 100000 \
\text { Operating loss } & \$ 10000 )
\end{array}$$
Overhead costs are 70% variable and the remaining 30% is depreciation of special equipment for model AE2 that has no resale value.
If Model AE2 is dropped from the product line,operating profit will:
A)increase by $30 000.
B)decrease by $20 000.
C)decrease by $10 000.
D)increase by $10 000.

Camera Corner Is Considering Eliminating Model AE2 from Its Camera