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You are given the following decision schedule for a product line decision (keep or drop) prepared...

You are given the following decision schedule for a product line decision (keep or drop) prepared by someone who did not study Accounting 306:

Schedule if Product QC is eliminated:

Relevant revenue (lost) $12,448.75

Relevant cost avoided:

Variable costs: 7,500.00

Depreciation (scheduled to continue for 3 years) 6,400.00

Net Relevant income: $1,451.25 (12,448.75-7,500-6,400)

You are asked to check this schedule and decide whether to keep or drop the product. The best decision to recommend is

a. Drop the product because the schedule is correct

B. Keep the product because the schedule is correct

c. Drop the product because the schedule is not correct

D. Keep the product because the schedule is not correct

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Answer #1

INote: If the product line is discontinued, there will a loss of $ 4,949.75, hence the product shall not be discontinued.

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