Diamond Company has three product lines, A, B, and C. The following financial information is available Article
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Diamond Company has three product lines, A, B, and C. The following financial information is available
Article | Product Line A | Product Line B | product line C |
Sales | $30,000 | $45,000 | $12,000 |
Variable costs | $18,000 | $24,000 | $7,500 |
Contribution margin | $12,000 | $21,000 | $4,500 |
Fixed costs: | |||
Avoidable | $4,500 | $9,000 | $3,000 |
Inevitable | $3,000 | $4,500 | $2,000 |
operating income | $4,500 | $7,500 | ($500) |
Diamond is considering dropping the C product line because it reports an operating loss. Assuming the company eliminates product line C and does not replace it, what will be the company's operating income?
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