Question
he manager at the Sports Shop sells three types of sport products, small, medium, and large. Small Medium Large Sales $70,000 $100,000 $30,000 Variable costs
he manager at the Sports Shop sells three types of sport products, small, medium, and large. Small Medium Large Sales $70,000 $100,000 $30,000 Variable costs 40,000 52,000 18,000 Contribution margin 30,000 48,000 12,000 Fixed costs: Avoidable 7,000 17,000 10,000 Unavoidable 8,000 10,000 6,200 Operating income $15,000 $21,000 ($4,200) The manager at the Sports Shop needs to determine if the large product needs to be dropped because it is reporting a loss. What is the effect in operating income if the manager drops the large product and does not replace it? And what is the effect in operating income if the manager dropped the large product and rented out the space used to house the product for $10,000 per year? A. $3,000 increase; $10,000 decrease B. $2,000 decrease; $8,000 increase C. $5,000 increase; $14,000 decrease D. $1,000 increase; $6,000 decrease E. $4,000 decrease; $12,000 increase
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