Donnelly Company has three products, R2, R4, and R2D2. The following information is available:
-Donnelly Company is thinking of dropping Product R2D2 because it is reporting a loss.Assuming Donnelly drops Product R2D2 and does not replace it,operating income will:
A)increase by $1,200.
B)increase by $1,500.
C)decrease by $1,500.
D)decrease by $2,700.

Question

Donnelly Company has three products, R2, R4, and R2D2. The following information is available: 
-Donnelly Company is thinking of dropping Product R2D2 because it is reporting a loss.Assuming Donnelly drops Product R2D2 and does not replace it,operating income will:
A)increase by $1,200. 
B)increase by $1,500. 
C)decrease by $1,500. 
D)decrease by $2,700.

Quizplus · Accepted Answer

C)$12,000 - $7,500 - $3,000 = $1,500. The product contributes $1,500 toward corporate profits. Without the product, operating income would be $1,500 less than currently reported.

Donnelly Company Has Three Products, R2, R4, and R2D2