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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 $480,000 $340,000 $140,000
Variable expenses 355,000 235,000 120,000
Contribution margin 125,000 105,000 20,000
Fixed expenses 76,000 38,000 38,000
Operating income (loss) $49,000 $67,000 $(18,000)
If $25,000 of fixed costs will be eliminated by discontinuing the Fashion line, how will operating income be affected?
A) Increase $5,000
B) Decrease $45,000
C) Increase $54,000
D) Increase $103,000
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