2) Boots Plus has two product lines: Hiking boots and Fashion boots. Income statement data for the most recent year follow:

	Total	Hiking	Fashion
Sales revenue	$480,000	$340,000	$140,000
Variable expenses	355,000	235,000	120,000
Contribution margin	125,000	105,000	20,000
Fixed expenses	76,000	38,000	38,000
Operating income (loss)	$49,000	$67,000	$(18,000)

If $25,000 of fixed costs will be eliminated by discontinuing the Fashion line, how will operating income be affected?

A) Increase $5,000

B) Decrease $5,000

C) Increase $18,000

D) Increase $43,000

3) Blue Technologies manufactures and sells DVD players. Great Products Company has offered Blue Technologies $22 per DVD player for 10,000 DVD players. Blue Technologies' normal selling price is $30 per DVD player. The total manufacturing cost per DVD player is $18 and consists of variable costs of $14 per DVD player and fixed overhead costs of $4 per DVD player. (NOTE: Assume excess capacity and no effect on regular sales.)

Should Blue Technologies accept or reject the special sales order?

A) Accept, because operating income would increase $360,000.

B) Reject, because operating income would decrease $80,000.

C) Accept, because operating income would increase $80,000.

D) Reject, because operating income would decrease $160,000.

19) When the number of units produced is less than the number of units sold, how does operating income under variable costing differ from operating income under absorption (traditional) costing?

A) It is lower than operating income under absorption costing.

B) It is higher than operating income under absorption costing.

C) It is the same as operating income under absorption costing.

D) It depends upon the amount of decline.