Answer the following questions using the information below:
Rambo Company has three products, A, B, and C. The following information is available:

-Rambo Company is thinking of dropping Product C because it is reporting a loss. Assuming Rambo drops Product C and does NOT replace it, operating income will:
A)increase by $400
B)increase by $4,000
C)decrease by $5,000
D)decrease by $9,400

Question

Answer the following questions using the information below:
Rambo Company has three products, A, B, and C. The following information is available:
 
-Rambo Company is thinking of dropping Product C because it is reporting a loss. Assuming Rambo drops Product C and does NOT replace it, operating income will:
A)increase by $400 
B)increase by $4,000 
C)decrease by $5,000 
D)decrease by $9,400

Quizplus · Accepted Answer

If Product C is dropped, the operating income will decrease by $5,000, indicating that the loss reported by Product C is less than the fixed costs that would remain if the product is discontinued.

Answer the Following Questions Using the Information Below