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Rainbow Brothers Inc. has two product lines: Rain coats and Snow boots. The following is data on its Income statement for the most recent
Rainbow Brothers Inc. has two product lines: Rain coats and Snow boots. The following is data on its Income statement for the most recent year: Sales revenue Variable expenses Contribution margin Fixed expenses Operating income (loss) Total $530,000 Rain Coats $390,000 385,000 265,000 145,000 125,000 78,000 $67,000 39,000 $86,000 Snow Boots $140,000 120,000 20,000 39,000 $(19,000) If $25,000 of fixed costs will be eliminated by discontinuing the Snow Boots line, how will operating income be affected? A. Increase $72,000 B. Increase $139,000 C. Increase $5,000 D. Decrease $44,000
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