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The income statement for Sweet Dreams Company is divided by its 2 product line: pillows and blankets: blankets pillows total sales $620,000 $300,000 $920,000 variable
The income statement for Sweet Dreams Company is divided by its 2 product line: pillows and blankets:
blankets | pillows | total | |
sales | $620,000 | $300,000 | $920,000 |
variable costs | 465,000 | 240,000 | 705,000 |
contribution margin | 155,000 | 60,000 | 215,000 |
fixed costs | 76,000 | 76,000 | 152,000 |
operating income (loss) | 79,000 | (16,000) | 63,000 |
If Sweet Dreams can eliminate fixed costs of $50,000 and increase the sale of blankets by 3,000 units at a selling price of $20 per unit and a contribution margin of $5 per unit, then dropping the pillows should result in which of the following?
a. no change in operating income
b. increase in total operating income of $5000
c. decrease in operating income of $5000
d. increase in operating income of $25,000
Please show all work.
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