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2. Toyota Motor Corp. has three product lines-RAV 4, 4Runner, and Highlanser. The following information is available: RAV 4 $4Runner Highlander Sales revenue $70,000 $40,000
2. Toyota Motor Corp. has three product lines-RAV 4, 4Runner, and Highlanser. The following information is available: RAV 4 $4Runner Highlander Sales revenue $70,000 $40,000 $31,000 Variable costs (20,000) (5000) (11,000) Contribution margin $50,000 $35,000 $20,000 Fixed costs (10,000). (15,000) (24,000) Operating income (loss) $40,000 $20,000 $(4000) The company is deciding whether to drop product line for Highlander because it has an operating loss. Assume that $22,000 of total fixed costs could be eliminated by dropping the Highlander. What effect would this decision have on operating income? A) Operating income will increase by $24,000. B) Operating income will increase by $2000. C) Operating income will decrease by $24,000. D) Operating income will decrease by $2000
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