Question
Boots Plus has two product lines: Hiking boots and Fashion boots. Income statement data for the most recent year follow: Total Hiking Fashion Sales revenue
Boots Plus has two product lines: Hiking boots and Fashion boots. Income statement data for the most recent year follow:
Total | Hiking | Fashion | |
Sales revenue | $ 520 comma 000$520,000 | $ 380 comma 000$380,000 | $140,000 |
Variable expenses | 395 comma 000395,000 | 275 comma 000275,000 | 120,000 |
Contribution margin | 125 comma 000125,000 | 105 comma 000105,000 | 20,000 |
Fixed expenses | 81 comma 00081,000 | 40 comma 50040,500 | 40 comma 50040,500 |
Operating income (loss) | $44 comma 00044,000 | $ 64 comma 500$64,500 | $( 20 comma 500 )$(20,500) |
If
$ 25 comma 000$25,000
of fixed costs will be eliminated by discontinuing the Fashion line, how will operating income be affected?
A.
Increase $ 49 comma 000$49,000
B.
Increase $ 93 comma 000$93,000
C.
Decrease $ 45 comma 500$45,500
D.
Increase $ 5 comma 000
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