Question
Best Brands Inc. sells cat food and dog food. Here are data for the current year: Cat Food Dog Food Total Sales revenue $300,000 $85,000
Best Brands Inc. sells cat food and dog food. Here are data for the current year:
Cat Food
Dog Food
Total
Sales revenue
$300,000
$85,000
$385,000
Variable costs
(160,000)
(48,000)
(208,000)
Contribution margin
$140,000
$37,000
$177,000
Traceable fixed costs
0
0
0
Common fixed costs
(50,000)
(52,000)
(102,000)
Operating income (loss)
$90,000
$(15,000)
$75,000
If Best Brands discontinues the dog food product line, the machine time formerly used to produce dog food can be used to double the production of cat food. How would this impact operating income?
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