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Diamond Company has three product lines, A, B, and C. The following financial information is available: Item Product Line A Product Line B Product Line

Diamond Company has three product lines, A, B, and C. The following financial information is available:

Item Product Line A Product Line B Product Line C
Sales $30,000 $45,000 $12,000
Variable costs $18,000 $24,000 $7,500
Contribution margin $12,000 $21,000 $4,500
Fixed costs:
Avoidable $4,500 $9,000 $3,000
Unavoidable $3,000 $4,500 $2,000
Operating income $4,500 $7,500 ($500)

Assuming that Product Line C is discontinued and the manufacturing space formerly devoted to this line is rented for $6,000 per year, operating income for the company will likely:

Increase by $7,200.

Increase by $3,300.

Increase by some other amount.

Be unchangedthe two effects cancel each other out.

Increase by $4,500.

Can you show how you got the increases in bold above in excel?

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