Final answer:
Comparative income statements are crucial for companies in product line decision-making as they focus on profitability and operational performance. They aid in cost-benefit analysis and help companies to ignore sunk costs and concentrate on future outcomes. The correct option is A. statements of cash
Step-by-step explanation:
When making a product line decision, a company may focus on lost contribution margin and avoidable fixed costs or prepare comparative income statements. This choice is crucial because unlike the cash flow statements or balance sheets, income statements provide a clearer picture of operational performance and the potential profitability of different product lines.
Comparative income statements allow companies to analyze and compare profitability over different periods or between different product lines.
They help in making informed decisions by highlighting the cost and revenue differences. It is an especially useful tool in cost-benefit analysis where firms can weigh marginal costs against marginal benefits, and in ignoring sunk costs while focusing on future potentials. The correct option is A. statements of cash