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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 $480,000 $350,000 $130,000 Variable expenses 355,000 235,000 120,000 Contribution margin 125,000 115,000 10,000 Fixed expenses 78,000 39,000 39,000 Operating income (loss) $47,000 $76,000 $(29,000) If $22,000 of fixed costs will be eliminated by discontinuing the Sporty line, how will operating income be affected? A. Increase $12,000 B. Decrease $32,000 C. Increase $106,000 D. Increase $15,000
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