Knowledge Check 02 Villatech, Inc. produces three models of tablet computers--the J-touch, B-touch, and L-touch. The company is considering eliminating the B-touch model because it has been incurring operating losses for the past few years. The J-touch and L-touch have impressive sales records and have the potential to grow in the future. Sale Revenue Less: Variable costs Contribution margin Less: Direct fixed costs Segment margin Less: Common fixed costs Net operating income (loss) J-touch L-touch B-touch Total $800,000 $700,000 $500,000 $2,000,000 450,000 320,000 270,000 1,040,000 $350,000 $380,000 $230,000 $ 960,000 70,000 55,000 105,000 230,000 $280,000 $325,000 $125,000 $ 730,000 208,000 182,000 130,000 520,000 72,000 $143,000 $ (5,000) $ 210,000 The management expects that the elimination of the B-touch would increase sales of the L-touch by 40%, If Villatech eliminates the B-touch, its net operating income will Multiple Choice O Increase by $32,000 Increase Increase by $32,000 increase O Decrease by $125,000 Increase by $27,000 Increase by $5,000 Decrease by $152,000