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The income statement for Slumber Company is divided by its two product lines, blankets and pillows, as follows: Blankets Pillows Total Sales revenue $630,000 $300,000
The income statement for Slumber Company is divided by its two product lines, blankets and pillows, as follows:
Blankets | Pillows | Total | |
Sales revenue | $630,000 | $300,000 | $930,000 |
Variable costs | (445,000) | (240,000) | (685,000) |
Contribution margin | $185,000 | $60,000 | $245,000 |
Fixed costs | (76,000) | (75,000) | (151,000) |
Operating income (loss) | $109,000 | $(15,000) | $94,000 |
Slumber is considering eliminating the pillows product line. If this line is eliminated, Slumber will be able to eliminate
$74,000
of total fixed costs. How would this business decision impact operating income?
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