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
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
$530,000
$400,000
$130,000
Variable expenses
365,000
$245,000
120,000
Contribution margin
165,000
155,000
10,000
Fixed expenses
80,000
40,000
40,000
Operating income (loss)
$85,000
$115,000
$(-30,000)
Assuming the Sporty line is discontinued, total fixed costs remain unchanged, and the space formerly used to produce the line is rented for $30,000 per year, how will operating income be affected?
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