The Draper Corporation is considering dropping its Doombug toy due to continuing losses. Data on the toy for the past year follow: If the toy were discontinued, Draper could avoid $8,000 per year in fixed costs. The remainder of the fixed costs are not avoidable.
The annual financial advantage (disadvantage) for the company from discontinuing the production and sale of Doombugs would be:
A) ($30,000)
B) $10,000
C) ($22,000)
D) $18,000

Question

The Draper Corporation is considering dropping its Doombug toy due to continuing losses. Data on the toy for the past year follow:  If the toy were discontinued, Draper could avoid $8,000 per year in fixed costs. The remainder of the fixed costs are not avoidable.
The annual financial advantage (disadvantage) for the company from discontinuing the production and sale of Doombugs would be:
A) ($30,000) 
B) $10,000 
C) ($22,000) 
D) $18,000

Quizplus · Accepted Answer

11eacbfc_c63d_d6ca_8ffe_116fee5747bc_TB7552_00 If the product is discontinued, the company will be giving up the annual profit of $22,000 from the toy.

The Draper Corporation Is Considering Dropping Its Doombug Toy Due