Question
A company is considering eliminating Model A777 because of losses over the past quarter. The company wants to know whether Model A777 should be dropped
A company is considering eliminating Model A777 because of losses over the past quarter. The company wants to know whether Model A777 should be dropped from the product line. The past three months of information for Model A777 are summarized below: Sales (1,000 units) 470,000 Manufacturing costs: Direct materials 160,000 Direct labor ($16 per hour) 80,000 Overhead costs 310,000 Operating income (loss) ($80,000) Overhead costs are 70% variable and the remaining 30% is depreciation of special equipment for Model A777 that has no resale value. Required: (3 points each) A) How would the company operating income be changed if Model A777 is dropped from the product line? In the answer box, enter increased if the company operating income would be increased or decreased if the company operating income would be decreased or nil if the company operating income would remain the same. B) If Model A777 is dropped, by how much would the company operating income be changed? Enter the increased amount or decreased amount or "0" in the answer box. Do not enter currency sign, comma, and decimal point if any
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