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Powder, Inc. has two product lines snow skis and water skis. The income statement data for the most recent year is as follows: Total Snow
Powder, Inc. has two product lines snow skis and water skis. The income statement data for the most recent year is as follows:
Total
Snow skis
Water skis
Sales revenue
$980,000
$650,000
$330,000
Variable costs
(425,000)
(175,000)
(250,000)
Contribution margin
$555,000
$475,000
$80,000
Fixed costs
(185,000)
(80,000)
(105,000)
Operating income (loss)
$370,000
$395,000
$(25,000)
Question:What is the effect of dropping the water skis line on the operating income of the company assuming no changes in fixed costs?
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