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Brown Manufacturing makes single kayaks, double kayaks, and lightweight competitive kayaks. The ...

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Brown Manufacturing makes single kayaks, double kayaks, and lightweight competitive kayaks. The ...

Brown Manufacturing makes single kayaks, double kayaks, and lightweight competitive kayaks. The double kayak 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:

Single

Double

Competitive

Total

Sales	$687,500	$400,000	$1,037,500	$2,125,000
Variable costs	446,875	272,000	850,750	1,569,625
Contribution margin	240,625	128,000	186,750	555,375
Fixed costs	156,250	162,500	143,750	462,500
Operating income	$ 84,375	$(34,500)	$ 43,000	$ 92,875

Of the fixed costs, $393,750 is common costs that have been allocated equally to each product line. What will total operating income be if Brown drops the double kayak line?

▸ $(3,875)

▸ $96,750

▸ $33,625

▸ $127,375

Textbook

Managerial Accounting

Edition: 4^th

Author: Davis

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