Westfall Watches has two product lines: Luxury watches and Sporty watches. Income statement data for the most
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Question:
Westfall Watches has two product lines: Luxury watches and Sporty watches. Income statement data for the most recent year follow:
| Total | Luxury | Sporty | |
| Sales revenue | $490,000 | $360,000 | $130,000 |
| Variable expenses | 355,000 | 235,000 | 120,000 |
| Contribution margin | 135,000 | 125,000 | 10,000 |
| Fixed expenses | 76,000 | 38,000 | 38,000 |
| Operating income (loss) | $59,000 | $87,000 | $(28,000) |
If $20,000 of fixed costs will be eliminated by discontinuing the Sporty line, how will operating income be affected?
A.
Increase $69,000
B.
Increase $10,000
C.
Increase $128,000
D.
Decrease $30,000
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