Macaulay Company Has Three Product Lines-D, E, and F

Multiple Choice

Macaulay Company has three product lines-D, E, and F. The following information is available: Macaulay Company is thinking of dropping product line F because it is reporting an operating loss. Assume that $25,000 of total fixed costs could be eliminated by dropping F. What effect would this decision have on operating income?

A) Operating income will increase by $25,000.
B) Operating income will increase by $5,000.
C) Operating income will decrease by $25,000.
D) Operating income will decrease by $5,000.