The income statement for Sweet Dreams Company is divided by its two product lines, blankets and pillows, as follows:

If Sweet Dreams can eliminate total fixed costs of $30,000 by dropping the pillows line, operating income will go up by $16,000. Is this statement true or false?

Sales revenue Variable expenses Contribution margin Fixed expenses Operating income (loss) Blankets Pillows $620,000 $300,000 465,000 240,000 155,000 60,000 76,000 76,000 $79,000 $(16,000) Total $920,000 705,000 215,000 152,000 $63,000