Hyde Products, Inc

Multiple Choice

Hyde Products, Inc., produces three grades of leather fabric: economy, standard, and luxury, which are used in automobile seating. Based on the following report of profitability in the past year, the company is considering eliminating its economy line. All fixed costs in the report are common and have been allocated based on yards of fabric sold.
If the economy grade of leather is dropped, how would the profitability of the standard grade be affected?

A) Profitability of the standard grade would remain as $12,000.
B) Profitability of the standard grade would be $108,000.
C) Profitability of the standard grade would become a loss of $25,500.
D) Profitability of the standard grade would become a loss of $88,000.