Question
Canadian Cycle sells a variety of bicycles: Comfort, Road, and Mountain bikes. Sales of the Mountain bikes have fallen off. The following information is available:
Canadian Cycle sells a variety of bicycles: Comfort, Road, and Mountain bikes. Sales of the Mountain bikes have fallen off.
The following information is available:
| Comfort | Road | Mountain | |
| Sales revenue | $225,000 | $975,000 | $237,500 |
| Variable costs | $112,500 | $600,000 | $200,000 |
| Fixed costs | $50,000 | $210,000 | $43,500 |
| Operating income | $62,500 | $165,000 | -$6,000 |
If the Mountain bike line is dropped, the $43,500 of fixed cost is avoidable.
Calculate the impact on operating income if the Mountain bike line is dropped and answer the following questions.
If the Mountain bike line is dropped, operating income would ________________.
Input the word INCR for increase or DECR for decrease.
Indicate the dollar amount of the increase or decrease.
Input your answer as a positive number.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started