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Momentum Rollerblades has three product lines-D, E, and F. The following information is available: Sales revenue Variable costs Contribution margin Fixed costs Operating income
Momentum Rollerblades has three product lines-D, E, and F. The following information is available: Sales revenue Variable costs Contribution margin Fixed costs Operating income (loss) D $70,000 E $50,000 F $30,000 (20,000) (15,000) (12,000) $50,000 $35,000 $18,000 (15,000) (10,000) (24,000) $35,000 $25,000 $(6,000) 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 increase by $24,000. B. Operating income will increase by $4,000. O C. Operating income will decrease by $24,000. D. Operating income will decrease by $4,000.
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