nike Products has three different lines of shoes. Two of the lines are doing very welland one

(the Cheapo Shoe line) is even approaching capacity lie, they can sell althey can make.

Unfortunately, the high end "Stand Out' product line is not doing so well and the company is

considering dropping it. Last year's income statement for the nike product line was as follws:

Sales

$1,750,600

Cost of Goods sold

variable manufacturing portion

fixed manufacturing portion

Gross Profit

1,050,000

620.000 1670,000

80,000

Selling and Administration

Sales commissions (10% of salks)

175,000

Advertising dedicated to the Stand Out

product line

125,000

45,000

320.000

Allocated head office expenses

($240,000)

Operating loss

$200,000 of the fixed manufacturing costs are avoidable if the product line is discontinued. The balance

reflects common fixed costs that have been allocated to the three product lines on the basis of sales:

24. Should the company drop the nike product line? By how much would company

operating income increase or decrease it the Stand Out product line is dropped?

a. Company net income will increase by $240,000

b. Company netincome willdecrease by 5200,000

C. Company net income will increase by $40000

d Company net income will decrease by $180,000

O e. Company net income will decrease by $225,000

Use the following information for questions 24 and 25 Look Sharp Products has three different lines of shoes. Two of the lines are doing very well and ore (the Cheapo Shoe line) is even approaching capacity (e, they can sel at they can make) Unfortunately, the high end "Stand Out product line is not going so well and the company's considering dropping it. Last year's income staternent for the Stand Out product fire was as bolous $1,750,000 Sales 1,050,000 620.000 1670.000 80,000 175,000 Cost of Goods sold variable manufacturing portion fixed manufacturing portion Gross Profit Selling and Administration Sales commissions (10% of sales) 125.000 45000 320.000 Advertising dedicated to the Stand Out product line Allocated head office expenses Operating loss $200,000 of the fixed manufacturing costs are available the product line is discontinued The reflects common fixed costs that have bean alocated to the three product lines on the basis of sales 24. Should the company drop the Stand Out product line? By how much sul comery operating income increase or decrease if the Stand Out product line is daar come will increase by $249000 299000 125,000 45,000 320.000 Advertising dedicated to the Stand Out product line 1$240.000 Allocated head office expenses Operating loss $200,000 of the fixed manufacturing costs are avoidable if the product ine s discontinued. The balance reflects common fixed costs that have been allocated to the three product lines on the basis of sales 24. Should the company drop the Scand Out product line? By how much would company operating income increase or decrease if the Stand Out product line is dropped? O a. Company net income will increase by $240,000 Ob. Company net income will decrease by $200,000 C. Company net income will decrease by $400,000 0 Company net income wil decrease by $180,000 Od O e Company net income will decrease by $225.000 above, assume that the stand out protet That is the stand out de les Stand Output 08