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Pet Food Inc. has two product lines: Cat food and Dog food. Contribution margin Income statement data for the most recent year follow. Total Cat
Pet Food Inc. has two product lines: Cat food and Dog food. Contribution margin Income statement data for the most recent year follow. Total Cat Food Dog Food Sales revenue $395,000 $310.000 $85.000 Variable expenses $65.000 $25,000 $40,000 Contribution margin $330.000 $285,000 545,000 Fixed expenses $102,000 550.000 $52,000 Operating income (1058 $228,000 S235,000 $17.000) Assuming the Dog food is discontinued total fixed costs remain unchanged, and the space formerly used to produce the line is rented for $25,000 per yeur, how will operating income be affected? A. Increase $436.000 B. Increase $20,000 c. Decrease $20,000 D. Increase $200.000
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