Why 0-0?

Q11 Armor Sports, Inc. has two product lines-batting helmets and football helmets. The income statement data for the most recent year is as follows: Sales revenue Variable costs Contribution margin Fixed costs Operating income (loss) Total $950,000 (490,000) $460,000 (170,000) $290,000 Batting Helmets $600,000 (200,000) $400,000 (70,000 $330,000 Football Helmets $350,000 (290,000) $60,000 (100,000) S(40,000) Requirements: 1. If $50,000 of fixed costs will be eliminated by dropping the football helmets line, how will dropping football helmets affect operating income of the company? 2. Assuming the football helmet line is dropped, total fixed costs remain unchanged, and the space formerly used to produce the football helmet line is used to double the production of batting helmets, how will dropping football helmets affect operating income of the company? Answers: 1. New Operating income from the dropped line: 20- 50000 = -50000 ere New operating income -Old operating income =-50000 - (-40000) - - 10000 Dropping Football Helmets will decrease operating income by 10000 dollar. O From where 2. Op Income from producing batting helmets using the football helmets line: 600000 - 200000 - 100000 = 300000 Total new OP Income = 330000 + 300000 630000 New OP Income - Old OP Income = 630000 - 290000 - 340000 The Operating Income will increase by 340000 dollar