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Sherman Hats, Inc. has two product lines-batting helmets and football helmets. The income statement data for the most recent year is as follows: Football Helmets
Sherman Hats, Inc. has two product lines-batting helmets and football helmets. The income statement data for the most recent year is as follows: Football Helmets Total Batting Helmets Sales revenue $930,000 $600,000 $330,000 Variable costs (540,000) 250,000) (290,000) Contribution margin $390,000 $350,000 $40,000 Fixed costs (160,000) 70,000) (90,000) Operating income (loss) $230,000 $280,000 $(50,000) Assuming the football helmets line is dropped, total fixed costs remain unchanged, and the space formerly used to produce the line is rented for $100,000 per year, how will operating income be affected? Operating income will increase by $60,000 Operating income will increase by $40,000 Operating income will decrease by $40,000 Operating income will decrease by $60,000
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