Diamond Company has three product lines, A, B, and C. The following financial information is available:If Product Line C is discontinued and the manufacturing space formerly devoted to this line is rented for $6,000 per year, pre-tax operating income for the company will likely:
A) Be unchanged—the two effects cancel each other out.
B) Increase by $3,300.
C) Increase by $4,500.
D) Increase by $7,200.
E) Increase by some other amount.

Question

Diamond Company has three product lines, A, B, and C. The following financial information is available:If Product Line C is discontinued and the manufacturing space formerly devoted to this line is rented for $6,000 per year, pre-tax operating income for the company will likely:
A) Be unchanged—the two effects cancel each other out. 
B) Increase by $3,300. 
C) Increase by $4,500. 
D) Increase by $7,200. 
E) Increase by some other amount.

Quizplus · Accepted Answer

The Answer of Diamond Company has three product lines, A, B, and C. The following financial information is available:If Product Line C is discontinued and the manufacturing space formerly devoted to this line is rented for $6,000 per year, pre-tax operating income for the company will likely:
A) Be unchanged—the two effects cancel each other out. 
B) Increase by $3,300. 
C) Increase by $4,500. 
D) Increase by $7,200. 
E) Increase by some other amount.

Diamond Company Has Three Product Lines, A, B, and C