Answer the Following Questions Using the Information Below:
Rockhampton Company

Answer the following questions using the information below:
Rockhampton Company has three products,X,Y and Z.The following information is available:
$$\begin{array} { l r r r } & \text { Product X } & \text { Product Y } & \text { Product Z } \\\text { Sales } & \$ 60000 & \$ 90000 & \$ 24000 \\\text { Variable costs } & \underline { 36000 } & \underline { 48000 } & \underline { 15000 } \\\text { Contribution margin } & 24000 & 42000 & 9000 \\\text { Fixed costs: } & & & \\\quad \text { Avoidable } & 9000 & 18000 & 6000 \\\quad \text { Unavoidable } & \underline { 6000 } & \underline { 9000 } & \underline { 5400 } \\\text { Operating profit } & \underline { \$ 9000 } & \$ 15000 & \$ ( 2400 ) \end{array}$$
-Rockhampton Company is thinking of dropping Product Z because it is reporting a loss.Assuming Rockhampton drops Product Z and does not replace it,operating profit will:

A) decrease by $5400.
B) increase by $2400.
C) decrease by $3000.
D) increase by $3000.

Correct Answer:

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