Question
Boots Plus has two productlines: Hiking boots and Fashion boots. Income statement data for the most recent yearfollow: Total Hiking Fashion Sales revenue $480,000 $340,000
Boots Plus has two productlines: Hiking boots and Fashion boots. Income statement data for the most recent yearfollow:
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)
Assuming the Fashion line isdiscontinued, total fixed costs remainunchanged, and the space formerly used to produce the Fashion line is used to increase the production of Hiking boots by an additional250%, how will operating income beaffected?
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