Question
The income statement for Slumber Company is divided by its two product lines, blankets and pillows, as follows: Blankets Pillows Total Sales revenue $620,000 $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 $620,000 $300,000 $920,000 Variable costs (455,000) (241,000) (696,000) Contribution margin $165,000 $59,000 $224,000 Fixed costs (74,000) (74,000) (148,000) Operating income (loss) $91,000 $(15,000) $76,000 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? A. increase of $15,000 in operating income B. increase of $133,000 in operating income C. increase of $74,000 in operating income D. decrease of $59,000 in operating income
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