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 | $415,000 | $330,000 | $85,000 |
| Variable expenses | $64,000 | $24,000 | $40,000 |
| Contribution margin | $351,000 | $306,000 | $45,000 |
| Fixed expenses | $98,000 | $46,000 | $52,000 |
| Operating income (loss) | $253,000 | $260,000 | $(7,000) |
Assuming total fixed costs remain unchanged, how would discontinuing the Dog food line affect operating income?
A.
Decrease in total operating income of $45,000
B.
Increase in total operating income of $208,000
C.
Increase in total operating income of $7,000
D.
Decrease in total operating income of $461,000
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Auditing Fundamentals In A South African Context
Authors: Gerrit Penning, Rika Butler, Pieter Von Wielligh, Frans Prinsloo
2nd Edition
0190749040, 978-0190749040
