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skully skully
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7 years ago
The manager at the Sports Shop sells three types of sport products, small, medium, and large.

      Small   Medium   Large
Sales   $70,000   $100,000   $30,000
Variable costs   40,000   52,000   18,000
Contribution margin   30,000   48,000   12,000
Fixed costs:
   Avoidable   7,000   17,000   10,000
   Unavoidable   8,000   10,000     6,200
Operating income   $15,000   $21,000   ($4,200)

The manager at the Sports Shop needs to determine if the large product needs to be dropped because it is reporting a loss. Compute the increase or decrease in operating income if the manager drops the large product and does not replace it.

If the manager dropped the large product and rented out the space used to house the product for $10,000 per year, what is the increase or decrease in operating income?
A) $1,000 increase; $6,000 decrease
B) $2,000 decrease; $8,000 increase
C) $3,000 increase; $10,000 decrease
D) $4,000 decrease; $12,000 increase
E) $5,000 increase; $14,000 decrease
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Managerial Accounting: Decision Making and Motivating Performance

Managerial Accounting: Decision Making and Motivating Performance


Edition: 1st
Authors:
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Managerial Accounting: Decision Making and Motivating Performance
University of Pittsburgh
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lordingtonlordington
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skully Author
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#2
7 years ago
You're way better than my teacher, thanks Thumbs Up Sign
Managerial Accounting: Decision Making and Motivating Performance
University of Pittsburgh
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#3
3 years ago
thank you so much.
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