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8 years ago
Macaulay Roller Skates has three product lines - D, E, and F. The following information is available:

   D   E   F
Sales revenue   $70,000   $60,000   $31,000
Variable costs   (30,000)   (10,000)   (12,000)
Contribution margin   $40,000   $50,000   $19,000
Fixed costs   (15,000)   (10,000)   (24,000)
Operating income (loss)   $25,000   $40,000   $(5,000)

The company is deciding whether to drop product line F because it has an operating loss. Assuming fixed costs are unavoidable, if Macaulay drops product line F and does not replace it, what effect will this have on operating income?
A) Operating income will increase $5,000.
B) Operating income will increase $24,000.
C) Operating income will increase $19,000.
D) Operating income will decrease $19,000.
Textbook 
Horngren's Financial & Managerial Accounting, The Financial Chapters

Horngren's Financial & Managerial Accounting, The Financial Chapters


Edition: 5th
Authors:
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#2
8 years ago
Makes perfect sense, thx
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#3
4 years ago
perfect
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#4
4 years ago
Thanks  for the great help
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