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bioboy12 bioboy12
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4 months ago
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:

HomeRetailIndustrialTotal
Sales$550,000$320,000$830,000$1,700,000
Variable costs357,500217,600680,6001,255,700
Contribution margin192,500102,400149,400444,300
Fixed costs 125,000 130,000  115,000    370,000
Operating income$   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
Textbook 

Managerial Accounting


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nursethomasnursethomas
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4 months ago
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More solutions for this book are available here
$(3,100)

$315,000 ÷ 3 = $105,000 to be absorbed by remaining product lines;
($67,500 + $34,400) - $105,000 = -$3,100 operating loss
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Brilliant
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