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Title: Westfall Watches has two product lines: Luxury watches and Sporty watches. Income statement data for ... Post by: needanswersnowp on Feb 28, 2018 4) Westfall Watches has two product lines: Luxury watches and Sporty watches. Income statement data for the most recent year follow:
Total Luxury Sporty Sales revenue $530,000 $400,000 $130,000 Variable expenses 365,000 $245,000 120,000 Contribution margin 165,000 155,000 10,000 Fixed expenses 80,000 40,000 40,000 Operating income (loss) $85,000 $115,000 $(-30,000) Assuming the Sporty line is discontinued, total fixed costs remain unchanged, and the space formerly used to produce the line is rented for $30,000 per year, how will operating income be affected? Title: Westfall Watches has two product lines: Luxury watches and Sporty watches. Income statement data for ... Post by: bio_man on Feb 28, 2018 Current operating income =$85,000
Now if Sporty Line is discontinued,fixed expenses of $40,000 will continue as a result of which operating loss of $40,000 will occur resulting in a net operating income of the company =(115,000-40,000)=$75000 hence the discontinue will result in a net loss of $10,000 because 85,000- $75000 Good luck with the rest |