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Accessibility Products Company Has Three Models: D,E,and F - Accessibility Products Company Is Thinking of Dropping Model F

Question 123

Multiple Choice

Accessibility Products Company has three models: D,E,and F.The following information is available:
 Model D  Model E  Model F  Sales revenue $55,000$35,000$29,000 Variable expenses $32,000$13,000$14,000 Contribution margin $23,000$22,000$15,000 Fixed expenses $16,000$16,000$16,000 Operating income (loss)  $7,000$6,000$(1,000) \begin{array} { | l | r | r | r | } \hline & { \text { Model D } } &{ \text { Model E } } & { \text { Model F } } \\\hline \text { Sales revenue } & \$ 55,000 & \$ 35,000 & \$ 29,000 \\\hline \text { Variable expenses } & \$ 32,000 & \$ 13,000 & \$ 14,000 \\\hline \text { Contribution margin } & \$ 23,000 & \$ 22,000 & \$ 15,000 \\\hline \text { Fixed expenses } & \$ 16,000 & \$ 16,000 & \$ 16,000 \\\hline \text { Operating income (loss) } & \$ 7,000 & \$ 6,000 & \$ ( 1,000 ) \\\hline\end{array}
- Accessibility Products Company is thinking of dropping model F because it is reporting an operating loss.All fixed costs are unavoidable.Assuming Accessibility Products Company drops line F and is able to double the production and sales of model E without increasing fixed costs.What affect will this have on operating income?


A) Increase $23,000
B) Decrease $23,000
C) Increase $7,000
D) Decrease $7,000

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