Pirate Company's management is considering dropping its small television product line due to

continued operating losses. Pirate has forecasted an operating loss of $25,000 for the upcoming
year.

Fixed expenses for the upcoming year are forecasted at $45,000, of which $30,000 are
considered to be avoidable. Should Pirate Company drop the small television product line?
A) Yes, because the avoidable fixed costs exceed the contribution margin that would be lost.
B) No, because the contribution margin that would be lost exceeds the $45,000 of fixed costs.
C) Yes, because of the forecasted operating loss of $25,000.
D) No, because the unavoidable fixed costs are less than the forecasted operating loss.

A

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