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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 $500,000 $360,000 $140,000 Variable expenses 385,000 265,000 120,000 Contribution margin 115,000 95,000 20,000 Fixed expenses 77,000 38,500 38,500 Operating income (loss) $38,000 $56,500 $(18,500) Assuming the Fashion line is discontinued, total fixed costs remain unchanged, and the space formerly used to produce the line is rented for $25,000 per year, how will operating income be affected? A.Increase $5,000 B.Increase $43,000 C.Decrease $5,000 D.Increase $81,000
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