Question
Armor Sports, Inc. has two product lineslong dashbatting helmets and football helmets. The income statement data for the most recent year is as follows: Total
Armor Sports, Inc. has two product
lineslong dashbatting
helmets and football helmets. The income statement data for the most recent year is as follows:
Total | Batting Helmets | Football Helmets | |
Sales revenue | $950,000 | $600,000 | $350,000 |
Variable costs | (490,000) | (200,000) | (290,000) |
Contribution margin | $460,000 | $400,000 | $60,000 |
Fixed costs | (170,000) | (70,000) | (100,000) |
Operating income (loss) | $290,000 | $330,000 | ($40,000) |
What is the effect of dropping football helmets line on the operating income of the company? (Assume that fixed costs remain unchanged and that there would be no adverse effect on other sales.)
A.
Operating income will increase by $70,000.
B.
Operating income will increase by $40,000.
C.
Operating income will decrease by $60,000.
D.
Operating income will decrease by $350,000.
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