Question
The income statement for Lovely Locks is divided by its two product lines, Curling Irons and Straighteners, as follows: Curling Irons Straighteners Total Sales revenue
The income statement for Lovely Locks is divided by its two product lines, Curling Irons and Straighteners, as follows:
Curling Irons | Straighteners | Total | |
Sales revenue | $650,000 | $260,000 | $910,000 |
Variable expenses | $490,000 | $210,000 | $700,000 |
Contribution margin | $160,000 | $50,000 | $210,000 |
Fixed expenses | $90,000 | $90,000 | $180,000 |
Operating income (loss) | $70,000 | -$40,000 | $30,000 |
If Lovely Locks can eliminate fixed costs of $33,000 and increase the sale of Curling Irons by 6500 units at a selling price of $33 per unit and a contribution margin of $11 per unit, then discontinuing the Straighteners should result in which of the following?
Decrease in total operating income of $54,500 | ||
Increase in total operating income of $84,500 | ||
Decrease in total operating income of $84,500 | ||
Increase in total operating income of $54,500 |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started