Garrett Company provided the following information: Common fixed cost totaled $46,000. Garrett allocates common fixed cost to Product 1 and Product 2 on the basis of sales. If Product 2 is dropped, which of the following is true? a. Sales will increase by $300,000. b. Overall operating income will increase by $2,600. c. Overall operating income will decrease by $25,000. d. Overall operating income will not change. e. Common fixed cost will decrease by $27,600.

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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
Publisher: Cengage Learning
ISBN: 9781337115773
BuyFind

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
Publisher: Cengage Learning
ISBN: 9781337115773

Solutions

Chapter 8, Problem 11MCQ
Textbook Problem

Garrett Company provided the following information:

Chapter 8, Problem 11MCQ, Garrett Company provided the following information: Common fixed cost totaled 46,000. Garrett

Common fixed cost totaled $46,000. Garrett allocates common fixed cost to Product 1 and Product 2 on the basis of sales. If Product 2 is dropped, which of the following is true?

  1. a. Sales will increase by $300,000.
  2. b. Overall operating income will increase by $2,600.
  3. c. Overall operating income will decrease by $25,000.
  4. d. Overall operating income will not change.
  5. e. Common fixed cost will decrease by $27,600.

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Chapter 8 Solutions

Managerial Accounting: The Cornerstone of Business Decision-Making
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