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Clothing Retail Store's accountant prepared the following income statement for the teenagers' accessories product line: Sales Less: Variable expenses Contribution margin Less: Fixed expenses:

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Clothing Retail Store's accountant prepared the following income statement for the teenagers' accessories product line: Sales Less: Variable expenses Contribution margin Less: Fixed expenses: Wages Insurance on inventory Advertising Net operating income (loss) $1,053,000 58,500 643,500 $2,925,000 1,374,750 1,550,250 1,755,000 $ (204,750) Management is concerned about the loss and is considering dropping the product line. If the product line is dropped, a job has to be created elsewhere for a long-term employee currently earning an annual salary of $102,500. Required: Calculate the increase or decrease in the operating income in both alternatives. Sales Fixed expenses Net operating income (loss) Keep Accesories Product Line Drop Accesories Product Line

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