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Momentum Rollerblades has three product linesD, E, and F. The following information is available: D E F Sales revenue $70,000 $40,000 $31,000 Variable costs (20,000)
Momentum Rollerblades has three product linesD, E, and F. The following information is available:
D | E | F | |
Sales revenue | $70,000 | $40,000 | $31,000 |
Variable costs | (20,000) | (5000) | (11,000) |
Contribution margin | $50,000 | $35,000 | $20,000 |
Fixed costs | (10,000) | (15,000) | (24,000) |
Operating income (loss) | $40,000 | $20,000 | $(4000) |
The company is deciding whether to drop product line F because it has an operating loss. Assume that $22,000 of total fixed costs could be eliminated by dropping F. What effect would this decision have on operating income?
a. Operating income will decrease by $2000. | ||
b. Operating income will increase by $2000. | ||
c. Operating income will increase by $24,000. | ||
d. Operating income will decrease by $24,000. |
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