The managers of Adamson Apple Ltd. are considering dropping one of their product lines. The product line typically has the following revenue and costs: If the product line is discontinued, $4,000 of the fixed costs would be avoided. Also, the freed-up capacity would generate $4,000 of additional contribution margin from the expansion of other product lines. If Adamson discontinues the product line, the effect on overall profit will be
A) $12,000 decrease
B) $8,000 decrease
C) $9,000 increase
D) $3,000 increase

Question

The managers of Adamson Apple Ltd. are considering dropping one of their product lines. The product line typically has the following revenue and costs:  If the product line is discontinued, $4,000 of the fixed costs would be avoided. Also, the freed-up capacity would generate $4,000 of additional contribution margin from the expansion of other product lines. If Adamson discontinues the product line, the effect on overall profit will be
A) $12,000 decrease 
B) $8,000 decrease 
C) $9,000 increase 
D) $3,000 increase

Quizplus · Accepted Answer

The Answer of The managers of Adamson Apple Ltd. are considering dropping one of their product lines. The product line typically has the following revenue and costs:  If the product line is discontinued, $4,000 of the fixed costs would be avoided. Also, the freed-up capacity would generate $4,000 of additional contribution margin from the expansion of other product lines. If Adamson discontinues the product line, the effect on overall profit will be
A) $12,000 decrease 
B) $8,000 decrease 
C) $9,000 increase 
D) $3,000 increase

The Managers of Adamson Apple Ltd