Tyler Corporation has provided you with the following budgeted income statement for one of its products
Sales revenue $800,000
Variable costs 540,000
Contribution margin $260,000
Fixed costs 275,000
Operating income (loss) $15,000
Tyler Corporation believes that 70% of the fixed costs would be avoidable if the product line was dropped. Based on the impact on the company's operating income or loss, Tyler should keep the product line.
Indicate whether the statement is true or false
TRUE .Unavoidable fixed costs (275,000 x 30%) $82,500
Operating loss $15,000
Because operating loss is less than unavoidable fixed costs, the company must continue to operate.
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