Biology Forums - Study Force

Leonora Industries manufactures light fixtures for home, retail, and industrial customers. The retail line has been showing losses for several years, and management is considering dropping the line. Recent income statements have been very similar to the following information which was prepared for the most recent year:

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Home

Retail

Industrial

Total

Sales	$550,000	$320,000	$830,000	$1,700,000
Variable costs	357,500	217,600	680,600	1,255,700
Contribution margin	192,500	102,400	149,400	444,300
Fixed costs	125,000	130,000	115,000	370,000
Operating income	$   67,500	$(27,600)	$   34,400	$     74,300

Of the fixed costs, $315,000 is common costs that have been allocated equally to each product line. What will total operating income be if Leonora drops the retail line?

▸ $77,400

▸ $101,900

▸ $(3,100)

▸ $26,900

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