Macaulay Company has three product lines-D,E and F.The following information is available:
$$\begin{array} { | l | l | l | l | }
\hline & { \text { D } } & { \text { E } } & { \text { F } } \
\hline \text { Sales } & \$ 70,000 & \$ 60,000 & \$ 30,000 \
\hline \text { Variable costs } & ( 30,000 ) & ( 10,000 ) & ( 12,000 ) \
\hline \text { Contribution margin } & \$ 40,000 & \$ 50,000 & 18,000 \
\hline \text { Fixed expenses } &( 20,000 ) & ( 10,000 ) & ( 23,000 ) \
\hline \text { Operating income (loss) } & \$ 20,000 & \$ 40,000 & (\$ 5000 ) \
\hline
\end{array}$$
Macaulay Company is thinking of dropping product line F because it is reporting an operating loss.Assuming fixed costs are unavoidable,if Macaulay Company drops product line F and does not replace it,what effect will this have on operating profit?

Question

Macaulay Company has three product lines-D,E and F.The following information is available:
$$\begin{array} { | l | l | l | l | } 
\hline &  { \text { D } } & { \text { E } } & { \text { F } } \
\hline \text { Sales } & \$ 70,000 & \$ 60,000 & \$ 30,000 \
\hline \text { Variable costs } & ( 30,000 ) & ( 10,000 ) & ( 12,000 ) \
\hline \text { Contribution margin } & \$ 40,000 & \$ 50,000 & 18,000 \
\hline \text { Fixed expenses } &( 20,000 ) & ( 10,000 ) & ( 23,000 ) \
\hline \text { Operating income (loss) } & \$ 20,000 & \$ 40,000 & (\$ 5000 ) \
\hline
\end{array}$$
Macaulay Company is thinking of dropping product line F because it is reporting an operating loss.Assuming fixed costs are unavoidable,if Macaulay Company drops product line F and does not replace it,what effect will this have on operating profit?

Quizplus · Accepted Answer

The Answer of Macaulay Company has three product lines-D,E and F.The following information is available:
$$\begin{array} { | l | l | l | l | } 
\hline &  { \text { D } } & { \text { E } } & { \text { F } } \
\hline \text { Sales } & \$ 70,000 & \$ 60,000 & \$ 30,000 \
\hline \text { Variable costs } & ( 30,000 ) & ( 10,000 ) & ( 12,000 ) \
\hline \text { Contribution margin } & \$ 40,000 & \$ 50,000 & 18,000 \
\hline \text { Fixed expenses } &( 20,000 ) & ( 10,000 ) & ( 23,000 ) \
\hline \text { Operating income (loss) } & \$ 20,000 & \$ 40,000 & (\$ 5000 ) \
\hline
\end{array}$$
Macaulay Company is thinking of dropping product line F because it is reporting an operating loss.Assuming fixed costs are unavoidable,if Macaulay Company drops product line F and does not replace it,what effect will this have on operating profit?

Macaulay Company Has Three Product Lines-D,E and F Macaulay Company Is Thinking of Dropping Product Line F Because