The following information pertains to Dodge Company's three products: $\begin{array}{lrrr}
&A&B&C\
\text { Unit sales per year } & 250 & 400 & 250\
\text { Selling price per unit } & £ 9.00 & £ 12.00 & £ 9.00 \
\text { Variable costs per unit } & 3.60 & 9.00 & 9.90 \
\text { Unit contribution margin } & £ 5.40 & £ 3.00 & £(0.90) \
\text { Contribution margin ratio } & 60 \% &25\%& 10) \%
\end{array}$ Assume that product C is discontinued and the extra space is rented for £300 per month. All other information remains the same as the original data. Annual profits will

Question

Quizplus · Accepted Answer

Discontinuing product C removes its negative contribution to profit (250 units * £(0.90) = £(225) annually) and adds rental income (£300 * 12 = £3,600 annually). The net increase in annual profits is £3,600 - £225 = £3,375, not an option provided, suggesting a possible misunderstanding or error in the question or choices given.

The Following Information Pertains to Dodge Company's Three Products Assume That Product C Is Discontinued and the Extra Space