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Momentum Rollerblades has three product linesD, E, and F. The following information is available: D E F Sales revenue $90,000 $40,000 $30,000 Variable costs (20,000)
Momentum Rollerblades has three product linesD, E, and F. The following information is available: D E F Sales revenue $90,000 $40,000 $30,000 Variable costs (20,000) (15,000) (11,000) Contribution margin $70,000 $25,000 $19,000 Fixed costs (15,000) (10,000) (24,000) Operating income (loss) $55,000 $15,000 $(5,000) The company is deciding whether to drop product line F because it has an operating loss. Assume that $23,000 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 $24,000. B. Operating income will increase by $24,000. OC. Operating income will increase by $4,000. OD. Operating income will decrease by $4,000. Doherty Company is considering replacing the individual printers each employee in the corporate office currently uses with a network printer located in a central area. The network printer is more efficient and would, therefore, cost less to operate than the individual printers. However, most of the office staff think having to use a centralized printer would be inconvenient. They prefer to have individual printers located at each desk. Identify the following information as financial or nonfinancial and relevant or irrelevant. The first item has been completed as an example. (Identify the items listed with an "X" for each item as financial or nonfinancial and relevant or irrelevant. Leave unused cells blank.) Financial Nonfinancial Relevant Irrelevant 1. Amount paid for current printers 2. Resale value of current printers 3. Cost of new printer 4. Operating costs of current printers 5. Operating costs of new printers 6. Employee morale
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