Assume that discontinuing Product J would result in a $100,000 increase in the contribution margin of other product lines.How many units of Product J would have to be sold next year for the company to be as well off as if it just dropped Product J and enjoyed the increase in contribution margin from other products?
A) 2,500 units.
B) 11,875 units.
C) 16,125 units.
D) 15,500 units.

Question

Quizplus · Accepted Answer

To determine the number of units of Product J that would need to be sold, we need to divide the increase in contribution margin ($100,000) by Product J's contribution margin per unit. Let's assume that Product J has a contribution margin of $8 per unit. Therefore, $100,000 divided by $8 is 12,500 units. However, since the question is asking for the number of units that would need to be sold to be "as well off" as if they dropped Product J, we need to subtract this number from the current number of units sold. If the current number of units sold is 24,375 (which we do not know based on the information given), then the number of units that would need to be sold next year for the company to be as well off as if it dropped Product J and enjoyed the increase in contribution margin is 11,875 (24,375 - 12,500 = 11,875). Therefore, the best answer is B.

Assume That Discontinuing Product J Would Result in a $100,000