The Draper Company is considering dropping its Doombug toy due to continuing losses. Revenue and...
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The Draper Company is considering dropping its Doombug toy due to continuing losses. Revenue and costs data on the toy for the past year follow: Sales of 15,000 units $150,000 less Variable expenses $120,000 = Contribution margin $30,000 less Fixed expenses $40,000 = Net operating loss ($10,000) If the toy were discontinued, then Draper could avoid $8,000 per year in fixed costs. Under the given conditions, the change in annual operating income from discontinuing the production and sale of Doombugs would be: (Points : 2) $30,000 decrease $10,000 increase $22,000 decrease $18,000 increase
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