The following information pertains to Chrysnta Company's three products:

Assume that product C is discontinued and an extra space is rented for $800 per month.All other information remains the same as the original data.Annual profits will:
A) increase by $9,000.
B) decrease by $2,000.
C) increase by $9,600.
D) decrease by $600.

Question

The following information pertains to Chrysnta Company's three products:  
  
 Assume that product C is discontinued and an extra space is rented for $800 per month.All other information remains the same as the original data.Annual profits will:
A) increase by $9,000. 
B) decrease by $2,000. 
C) increase by $9,600. 
D) decrease by $600.

Quizplus · Accepted Answer

Increase in profit = (Number of units sold × Contribution margin) + Annual rent from extra space
Increase in profit = [300 units × ($2)] + [$800 × 12 months]
= ($600) + $9,600 = $9,000

The Following Information Pertains to Chrysnta Company's Three Products