Figure 9-4
The following information pertains to Ewing Company's three products: $\begin{array}{llll}
&D&E&F\
\text { Unit sales per month } & 900 & 1,400 & 800\
\text { Selling price per unit } & £ 6.00 & £ 11.25 & £ 7.50 \
\text { Variable costs per unit } & 3.00&9.00&7.80 \
\text { Unit contribution margin } & \underline{£ 3.00} & \underline{£ 2.25} & \underline{£(0.30)}
\end{array}$
-Refer to Figure 9-4. Assume that product F is discontinued and the space used to produce product F is rented for £600 per month. Monthly profits will
A)increase by £360.
B)decrease by £5,400.
C)increase by £600.
D)increase by £840.

Question

Quizplus · Accepted Answer

Discontinuing product F removes its negative contribution margin of £0.30 per unit for 800 units, which equals a loss of £240 (£0.30 * 800). Renting out the space adds £600 in income. The net effect is an increase in monthly profits by £840 (£600 - (-£240)).

Figure 9-4 the Following Information Pertains to Ewing Company's Three

Figure 9-4
the Following Information Pertains to Ewing Company's Three