Clothing Retail Stores accountant prepared the following income statement for the teenagers accessories product line:

Sales			$	2,875,000
Less: Variable expenses				1,351,250
Contribution margin				1,523,750
Less: Fixed expenses:
Wages	$	1,035,000
Insurance on inventory		57,500
Advertising		632,500		1,725,000
Net operating income (loss)			$	(201,250)

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 $101,500.

Required:

Calculate the increase or decrease in the operating income in both alternatives.

Should the teenagers accessories product line be dropped?

multiple choice

Yes

No

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