Question
All About Animals has two product lines: Cat food and Dog food. Contribution margin income statement data for the most recent year follow: Total Cat
All About Animals has two product lines: Cat food and Dog food. Contribution margin income statement data for the most recent year follow:
Total | Cat Food | Dog Food | |
Sales revenue | $385,000 | $300,000 | $85,000 |
Variable expenses | $205,000 | $165,000 | $40,000 |
Contribution margin | $180,000 | $135,000 | $45,000 |
Fixed expenses | $102,000 | $50,000 | $52,000 |
Operating income (loss) | $78,000 | $85,000 | $(7,000) |
If $12,000 of fixed costs will be eliminated by discontinuing the Dog food line, how will operating income be affected?
A. Increase $123,000
B. Decrease $33,000
C. Increase $45,000
D. Decrease $57,000
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started