Question 35 (9 points) Enzo Company manufactures a variety of athletic shoes: basketball, running, and tennis. Sales of the tennis shoes have fallen. Enzo is considering two options: (1) drop the tennis shoe line; or (2) replace the tennis shoe line with golf shoes. Price and cost data are as follows: Basketball Running Tennis Golf Price/unit $90 $65 $40 Variable cost/unit $45 $40 $35 $43 Basketball Running Tennis Golf Price/unit $90 $65 $40 $60 Variable cost/unit $45 $40 $35 $43 Total Fixed costs $200,000 $210,000 $50,000 $150,000 Number of units 10,000 15,000 2,500 25,000 If the tennis shoe line is dropped, 70% of the $50,000 fixed cost is avoidable. Required: Calculate the increase or decrease on operating income, using relevant amounts only, for option 1. Be sure to indicate if the operating profits increase or decrease. (3 marks) uclitast. IdIn b) Calculate the increase or decrease on operating income, using relevant amounts only, for option 2. Be sure to indicate if the operating profits increase or decrease. (4 marks) c) Which option is best? Identify one longer term strategic issue Enzo should consider before making the final decision. (2 marks) Price and cost data are as follows: Basketball Running Tennis Golf Price/unit $90 $65 $40 $60 Variable cost/unit $45 $40 $35 $43 Total Fixed costs $200,000 $210,000 $50,000 $150,000 Number of units 10,000 15,000 2,500 25,000 If the tennis shoe line is dropped, 70% of the $50,000 fixed cost is avoidable. Required: 10. % 1 * @@ 0 9 Q 8