Question
Oblo Corp makes three models of tablets. The sales mix is the same every month and is determined by number of tablets sold. Current operating
Oblo Corp makes three models of tablets. The sales mix is the same every month and is determined by number of tablets sold. Current operating data for the month are summarized below:
| Type A | Type B | Type C |
Selling price per unit | $ 400 | $ 500 | $ 250 |
Variable cost per unit | $ 100 | $ 200 | $ 150 |
Monthly sales volume | 600 | 500 | 500 |
*Fixed expenses per month total $185,820.
Oblo Corp.s management is considering the elimination of Type C model due to its low contribution margin. Because of this elimination, total fixed expenses would be reduced by $60,000 per month.
Assuming this change would not impact the sales of the other models, how much would Oblo Corp.s operating income increase or decrease by if Type C was eliminated?
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